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It Might Not Be A Great Idea To Buy FedNat Holding Company (NASDAQ:FNHC) For Its Next Dividend

Simply Wall St

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see FedNat Holding Company (NASDAQ:FNHC) is about to trade ex-dividend in the next four days. If you purchase the stock on or after the 13th of August, you won't be eligible to receive this dividend, when it is paid on the 1st of September.

FedNat Holding's next dividend payment will be US$0.09 per share. Last year, in total, the company distributed US$0.36 to shareholders. Based on the last year's worth of payments, FedNat Holding has a trailing yield of 3.6% on the current stock price of $9.92. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether FedNat Holding can afford its dividend, and if the dividend could grow.

See our latest analysis for FedNat Holding

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. FedNat Holding's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover.

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?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. FedNat Holding reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, FedNat Holding has lifted its dividend by approximately 4.1% a year on average.

Get our latest analysis on FedNat Holding's balance sheet health here.

To Sum It Up

Is FedNat Holding worth buying for its dividend? 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. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

Although, if you're still interested in FedNat Holding and want to know more, you'll find it very useful to know what risks this stock faces. Every company has risks, and we've spotted 4 warning signs for FedNat Holding you should know about.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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.