Dividend Investors: Don't Be Too Quick To Buy Fidelity National Information Services, Inc. (NYSE:FIS) For Its Upcoming Dividend

It looks like Fidelity National Information Services, Inc. (NYSE:FIS) is about to go ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Fidelity National Information Services' shares on or after the 10th of June will not receive the dividend, which will be paid on the 24th of June.

The company's next dividend payment will be US$0.36 per share. Last year, in total, the company distributed US$1.44 to shareholders. Last year's total dividend payments show that Fidelity National Information Services has a trailing yield of 1.9% on the current share price of US$75.96. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Fidelity National Information Services has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Fidelity National Information Services

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fidelity National Information Services paid out a disturbingly high 266% of its profit as dividends last year, which makes us concerned there's something we don't fully understand in the business.

When a company pays out a dividend that is not well covered by profits, the dividend is generally seen as more vulnerable to being cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Fidelity National Information Services's earnings per share have fallen at approximately 22% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Fidelity National Information Services has increased its dividend at approximately 5.0% a year on average. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. Fidelity National Information Services is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.

To Sum It Up

Has Fidelity National Information Services got what it takes to maintain its dividend payments? Not only are earnings per share shrinking, but Fidelity National Information Services is paying out a disconcertingly high percentage of its profit as dividends. It's not that we hate the business, but we feel that these characeristics are not desirable for investors seeking a reliable dividend stock to own for the long term. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

With that being said, if you're still considering Fidelity National Information Services as an investment, you'll find it beneficial to know what risks this stock is facing. To that end, you should learn about the 4 warning signs we've spotted with Fidelity National Information Services (including 1 which shouldn't be ignored).

A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.