Fiducian Group's (ASX:FID) Dividend Will Be Increased To A$0.18

Fiducian Group Ltd's (ASX:FID) dividend will be increasing from last year's payment of the same period to A$0.18 on 11th of September. This makes the dividend yield about the same as the industry average at 5.0%.

Check out our latest analysis for Fiducian Group

Fiducian Group's Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. The last payment made up 77% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

Earnings per share could rise by 5.9% over the next year if things go the same way as they have for the last few years. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 83%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

Fiducian Group Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was A$0.05, compared to the most recent full-year payment of A$0.303. This means that it has been growing its distributions at 20% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Fiducian Group has grown earnings per share at 5.9% per year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Fiducian Group will make a great income stock. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Now, if you want to look closer, it would be worth checking out our free research on Fiducian Group management tenure, salary, and performance. Is Fiducian Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.