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

FIDEA Holdings Co. Ltd. (TSE:8713) will pay a dividend of ¥37.50 on the 3rd of June. The dividend yield will be 4.6% based on this payment which is still above the industry average.

Check out our latest analysis for FIDEA Holdings

FIDEA Holdings Not Expected To Earn Enough To Cover Its Payments

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

FIDEA Holdings has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on FIDEA Holdings' last earnings report, the payout ratio is at a decent 88%, meaning that the company is able to pay out its dividend with a bit of room to spare.

EPS is set to fall by 10.0% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the future payout ratio could reach 102%, which could put the dividend in jeopardy if the company's earnings don't improve.

FIDEA Holdings Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was ¥50.00, compared to the most recent full-year payment of ¥75.00. This works out to be a compound annual growth rate (CAGR) of approximately 4.1% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Earnings per share has been sinking by 10% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

FIDEA Holdings' Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for FIDEA Holdings that investors should know about before committing capital to this stock. Is FIDEA Holdings not quite the opportunity you were looking for? Why not check out our selection of top 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.