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FIH group plc (LON:FIH) stock is about to trade ex-dividend in 3 days time. Ex-dividend means that investors that purchase the stock on or after the 15th of August will not receive this dividend, which will be paid on the 20th of September.
FIH group's upcoming dividend is UK£0.034 a share, following on from the last 12 months, when the company distributed a total of UK£0.05 per share to shareholders. Calculating the last year's worth of payments shows that FIH group has a trailing yield of 1.5% on the current share price of £3.25. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for FIH group
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. FIH group is paying out just 21% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow.
FIH group paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see how much of its profit FIH group paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at FIH group, with earnings per share up 2.8% on average over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. FIH group's dividend payments per share have declined at 4.6% per year on average over the past 10 years, which is uninspiring. FIH group is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.