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

FIDEA Holdings Co. Ltd.'s (TSE:8713) investors are due to receive a payment of ¥37.50 per share on 4th of December. Based on this payment, the dividend yield on the company's stock will be 5.2%, which is an attractive boost to shareholder returns.

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. While there are no guarantees that FIDEA Holdings will always be able to pay out a dividend, the company's payout ratio sits at 100%. This figure could be worrying with regards to the sustainability of the company's dividends, as earnings just barely cover its dividend payments.

If the company can't turn things around, EPS could fall by 17.0% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 124%, which is definitely a bit high to be sustainable going forward.

FIDEA Holdings Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the dividend has gone from ¥50.00 total annually to ¥75.00. This works out to be a compound annual growth rate (CAGR) of approximately 4.1% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

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. Let's not jump to conclusions as things might not be as good as they appear on the surface. FIDEA Holdings' EPS has fallen by approximately 17% per year during the past 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

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about FIDEA Holdings' payments, as there could be some issues with sustaining them into the future. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for FIDEA Holdings you should be aware of, and 1 of them makes us a bit uncomfortable. 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.