Readers hoping to buy Fiducian Group Limited (ASX:FID) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 27th of August in order to be eligible for this dividend, which will be paid on the 11th of September.
Fiducian Group's next dividend payment will be AU$0.11 per share. Last year, in total, the company distributed AU$0.23 to shareholders. Looking at the last 12 months of distributions, Fiducian Group has a trailing yield of approximately 4.2% on its current stock price of A$5.4. 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 check whether the dividend payments are covered, and if earnings are growing.
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. Fiducian Group paid out 68% of its earnings to investors last year, a normal payout level for most businesses.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Fiducian Group has grown its earnings rapidly, up 21% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Fiducian Group has increased its dividend at approximately 5.7% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
The Bottom Line
Is Fiducian Group an attractive dividend stock, or better left on the shelf? Fiducian Group has an acceptable payout ratio and its earnings per share have been improving at a decent rate. In summary, Fiducian Group appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Want to learn more about Fiducian Group? Here's a visualisation of its historical rate of revenue and earnings growth.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.