FBD Holdings (ISE:EG7) Will Pay A Dividend Of €1.00

FBD Holdings plc (ISE:EG7) has announced that it will pay a dividend of €1.00 per share on the 7th of June. This means the annual payment is 7.6% of the current stock price, which is above the average for the industry.

View our latest analysis for FBD Holdings

FBD Holdings Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite comfortably covered by FBD Holdings' earnings, but it was a bit tighter on the cash flow front. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Looking forward, earnings per share is forecast to fall by 52.6% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach over 200%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was €0.458 in 2014, and the most recent fiscal year payment was €1.00. This means that it has been growing its distributions at 8.1% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

We Could See FBD Holdings' Dividend Growing

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. It's encouraging to see that FBD Holdings has been growing its earnings per share at 9.9% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments FBD Holdings has been making. We don't think FBD Holdings is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for FBD Holdings you should be aware of, and 1 of them is potentially serious. 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.