FIDEA Holdings (TSE:8713) Has Announced A Dividend Of ¥37.50

The board of FIDEA Holdings Co. Ltd. (TSE:8713) has announced that it will pay a dividend on the 3rd of June, with investors receiving ¥37.50 per share. This means the annual payment is 4.7% of the current stock price, which is above the average for the industry.

Check out our latest analysis for FIDEA Holdings

FIDEA Holdings Will Pay Out More Than It Is Earning

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Having distributed dividends for at least 10 years, FIDEA Holdings has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but FIDEA Holdings' payout ratio of 44% is a good sign as this means that earnings decently cover dividends.

If the company can't turn things around, EPS could fall by 10.0% over the next year. If the dividend continues along recent trends, we estimate the future payout ratio could reach 101%, which could put the dividend in jeopardy if the company's earnings don't improve.

FIDEA Holdings Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, 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. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. FIDEA Holdings' EPS has fallen by approximately 10% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Our Thoughts On FIDEA Holdings' 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. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments FIDEA Holdings has been making. We don't think FIDEA 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. For example, we've picked out 1 warning sign for FIDEA Holdings that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.