FSA Group (ASX:FSA) Is Paying Out A Dividend Of A$0.035

FSA Group Limited (ASX:FSA) will pay a dividend of A$0.035 on the 9th of September. Based on this payment, the dividend yield on the company's stock will be 7.6%, which is an attractive boost to shareholder returns.

See our latest analysis for FSA Group

FSA Group Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, FSA Group was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 12.1% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 131%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of A$0.065 in 2014 to the most recent total annual payment of A$0.07. Dividend payments have grown at less than 1% a year over this period. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Has Limited Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. FSA Group's EPS has fallen by approximately 12% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Our Thoughts On FSA Group's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 6 warning signs for FSA Group (2 are potentially serious!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.