Fidelity National Information Services (NYSE:FIS) Is Increasing Its Dividend To $0.52

Fidelity National Information Services, Inc. (NYSE:FIS) will increase its dividend from last year's comparable payment on the 23rd of June to $0.52. This will take the dividend yield to an attractive 3.8%, providing a nice boost to shareholder returns.

See our latest analysis for Fidelity National Information Services

Fidelity National Information Services' Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Fidelity National Information Services is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. This gives us some comfort about the level of the dividend payments.

Over the next year, EPS is forecast to expand by 116.0%. If the dividend continues on this path, the payout ratio could be 48% by next year, which we think can be pretty sustainable going forward.

Fidelity National Information Services Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the dividend has gone from $0.80 total annually to $2.08. This means that it has been growing its distributions at 10% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Fidelity National Information Services' EPS has fallen by approximately 85% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Fidelity National Information Services will make a great income stock. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would be a touch cautious of relying on this stock primarily for the dividend income.

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 instance, we've picked out 1 warning sign for Fidelity National Information Services that investors should take into consideration. 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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