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Don't Race Out To Buy FedNat Holding Company (NASDAQ:FNHC) Just Because It's Going Ex-Dividend

Simply Wall St
·3 min read

Readers hoping to buy FedNat Holding Company (NASDAQ:FNHC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 13th of November, you won't be eligible to receive this dividend, when it is paid on the 1st of December.

FedNat Holding's next dividend payment will be US$0.09 per share, and in the last 12 months, the company paid a total of US$0.36 per share. Based on the last year's worth of payments, FedNat Holding has a trailing yield of 7.1% on the current stock price of $5.07. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for FedNat Holding

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. FedNat Holding lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable.

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

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. FedNat Holding was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. FedNat Holding has delivered an average of 4.1% per year annual increase in its dividend, based on the past 10 years of dividend payments.

Remember, you can always get a snapshot of FedNat Holding's financial health, by checking our visualisation of its financial health, here.

Final Takeaway

Is FedNat Holding an attractive dividend stock, or better left on the shelf? First, it's not great to see the company paying a dividend despite being loss-making over the last year. Worse, the general trend in its earnings looks negative in recent years. FedNat Holding doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with FedNat Holding. For example - FedNat Holding has 5 warning signs we think you should be aware of.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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.

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