FIDEA Holdings (TSE:8713) Will Pay 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. This makes the dividend yield 4.9%, which will augment investor returns quite nicely.

Check out our latest analysis for FIDEA Holdings

FIDEA Holdings Not Expected To Earn Enough To Cover Its Payments

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

FIDEA Holdings has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Although the company has a long history in paying out dividends, FIDEA Holdings' latest earnings report shows a payout ratio of 100%. This is a sign that FIDEA Holdings is barely covering its dividend.

Looking forward, EPS could fall by 17.0% 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 124%, which could put the dividend under pressure if earnings don't start to improve.

FIDEA Holdings Has A Solid Track Record

The company has an extended history of paying stable dividends. 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. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. FIDEA Holdings' EPS has fallen by approximately 17% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

The Dividend Could Prove To Be Unreliable

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 would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for FIDEA Holdings (of which 1 is significant!) you should know about. Is FIDEA Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.