FIDEA Holdings (TSE:8713) Is Paying Out 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 2nd of June. This means the annual payment is 5.3% 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

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 66% is a good sign as this means that earnings decently cover dividends.

Looking forward, EPS could fall by 21.4% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the future payout ratio could reach 173%, which could put the dividend under pressure if earnings don't start to improve.

FIDEA Holdings Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ¥50.00 in 2014, and the most recent fiscal year payment was ¥75.00. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Earnings per share has been sinking by 21% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into 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. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for FIDEA Holdings (1 is significant!) that you should be aware of before investing. 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.