Have you been keeping an eye on FIH group plc’s (LON:FIH) upcoming dividend of UK£0.03 per share payable on the 21 September 2018? Then you only have 2 days left before the stock starts trading ex-dividend on the 16 August 2018. What does this mean for current shareholders and potential investors? Below, I will explain how holding FIH group can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has the amount of dividend per share grown over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
Does FIH group pass our checks?
The current trailing twelve-month payout ratio for the stock is 22.20%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect FIH’s payout to increase to 27.53% of its earnings, which leads to a dividend yield of around 1.52%. However, EPS is forecasted to fall to £0.20 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Dividend payments from FIH group have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends.
Relative to peers, FIH group generates a yield of 1.69%, which is on the low-side for Consumer Retailing stocks.
If FIH group is in your portfolio for cash-generating reasons, there may be better alternatives out there. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three important aspects you should look at:
- Valuation: What is FIH worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether FIH is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on FIH group’s board and the CEO’s back ground.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.