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This FTSE small-cap UK stock has reinstated its dividends! Should you buy shares?

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Professional recruitment specialists The Robert Walters Group (LSE:RWA) delighted investors this week by reinstating dividends at 4.5p. The FTSE small cap cut its dividend in April as the global pandemic took hold and the UK was in lockdown. With job losses mounting daily, recruitment is a tough industry to be in. And this is mirrored in the firm’s net fee income decline of 31% for the quarter ended 30 September. However, the group’s net cash increased by 70% year-on-year to almost £139m, which stemmed from cutting 500 jobs.

Is a dividend justified as job losses mount?

The Robert Walters share price rose nearly 8% on the news of the dividend comeback on Thursday. But, you may wonder, how can Robert Walters justify reinstating its dividend, if it’s still suffering and its future is uncertain? Well, the good news is, the company is confident in its recruitment efforts towards tech sectors, including e-commerce, cybersecurity and fintech. These are all areas in which it has seen strong signs of hiring resume. This is reassuring, but it was already struggling before the pandemic, with Brexit worries putting a pause on recruitment. Unfortunately this may well continue to hold the company back in the coming months.

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Is Robert Walters a good investment?

Robert Walters is a well-established firm, with a global presence in over 30 countries. This means it requires the recruitment outlook to turn positive in many regions, not just the UK. The firm specialises in finding jobs for career professionals in engineering, finance, tech, and IT. Although some of these sectors look as if they’ll withstand the pandemic, there’s still uncertainty ahead.

The UK stock was first publicly listed in July 2000, but the firm has been operating since 1985. If you’d invested £1,000 in Robert Walters stock back at its IPO price of £1.70 per share, your investment would be worth approximately £2,328 today. However, those unlucky investors that bought in at the start of 2020 will be down 28%.

Lack of liquidity in a FTSE small cap

As it’s a FTSE small-cap stock, it doesn’t have a lot of liquidity, meaning there are not thousands of buyers and sellers at any one time. This can be problematic if you want to get out of the stock quickly, as you may get a lower price for your shares than you would like. That’s one reason FTSE 100 and FTSE 250 stocks are preferable for beginners to investing.

Robert Walters has a price-to-earnings ratio of 8 and earnings per share of 48p. As the outlook for jobs is negative just now, this is not a stock I want to buy. It’s reassuring that it sees signs of improvement, but I think growth is unlikely and progress will be slow until the job situation improves around the world. I’m sure things will look up for this firm once a vaccine is in widespread use, but until then I’ll avoid buying shares in Robert Walters. I think there are better shares to buy in the stock market.

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Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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