Fidelity National Financial's (NYSE:FNF) Upcoming Dividend Will Be Larger Than Last Year's
Fidelity National Financial, Inc. (NYSE:FNF) will increase its dividend on the 30th of September to US$0.40. This will take the dividend yield to an attractive 3.2%, providing a nice boost to shareholder returns.
Check out our latest analysis for Fidelity National Financial
Fidelity National Financial's Payment Has Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Fidelity National Financial's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
EPS is set to fall by 27.6% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 29%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Dividend Volatility
The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. Since 2011, the first annual payment was US$0.72, compared to the most recent full-year payment of US$1.60. This works out to be a compound annual growth rate (CAGR) of approximately 8.3% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see Fidelity National Financial has been growing its earnings per share at 34% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
Fidelity National Financial Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Fidelity National Financial (of which 1 is significant!) you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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.
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