FIDEA Holdings' (TSE:8713) Dividend Will Be ¥37.50

FIDEA Holdings Co. Ltd. (TSE:8713) will pay a dividend of ¥37.50 on the 2nd of June. This means the annual payment is 5.0% of the current stock price, which is above the average for the industry.

Check out our latest analysis for FIDEA Holdings

FIDEA Holdings' Dividend Forecasted To Be Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

FIDEA Holdings has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but FIDEA Holdings' payout ratio of 60% is a good sign as this means that earnings decently cover dividends.

Unless the company can turn things around, EPS could fall by 5.9% over the next year. If the dividend continues along recent trends, we estimate the future payout ratio could be 66%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

FIDEA Holdings Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the dividend has gone from ¥50.00 total annually to ¥75.00. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Dividend Growth Is Doubtful

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Over the past five years, it looks as though FIDEA Holdings' EPS has declined at around 5.9% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

In Summary

Overall, a consistent dividend is a good thing, and we think that FIDEA Holdings has the ability to continue this into the future. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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. Taking the debate a bit further, we've identified 1 warning sign for FIDEA Holdings that investors need to be conscious of moving forward. 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.