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 4th of December. Based on this payment, the dividend yield on the company's stock will be 4.6%, which is an attractive boost to shareholder returns.

View our latest analysis for FIDEA Holdings

FIDEA Holdings Will Pay Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much.

FIDEA Holdings has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Despite this history however, the company's latest earnings report actually shows that it didn't have enough earnings to cover its dividends. This is very worrying for shareholders, as this shows that FIDEA Holdings will not be able to sustain its dividend at its current rate.

If the company can't turn things around, EPS could fall by 20.2% over the next year. Assuming the dividend continues along recent trends, we believe the future payout ratio could reach 149%, which could put the dividend under pressure if earnings don't start to improve.

FIDEA Holdings Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of ¥50.00 in 2014 to the most recent total annual 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.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Earnings per share has been sinking by 20% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

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. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We don't think FIDEA Holdings is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for FIDEA Holdings you should be aware of, and 1 of them doesn't sit too well with us. 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.

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