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Fidelity National Information Services, Inc. (NYSE:FIS) stock is about to trade ex-dividend in four days. If you purchase the stock on or after the 11th of December, you won't be eligible to receive this dividend, when it is paid on the 28th of December.
Fidelity National Information Services's next dividend payment will be US$0.35 per share, on the back of last year when the company paid a total of US$1.40 to shareholders. Based on the last year's worth of payments, Fidelity National Information Services stock has a trailing yield of around 0.9% on the current share price of $149.86. If you buy this business for its dividend, you should have an idea of whether Fidelity National Information Services's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
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. Fidelity National Information Services reported a loss last year, so it's not great to see that it has continued paying a dividend. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Fidelity National Information Services didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It distributed 34% of its free cash flow as dividends, a comfortable payout level for most companies.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Fidelity National Information Services 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. In the past 10 years, Fidelity National Information Services has increased its dividend at approximately 21% a year on average.
We update our analysis on Fidelity National Information Services every 24 hours, so you can always get the latest insights on its financial health, here.
To Sum It Up
Should investors buy Fidelity National Information Services for the upcoming dividend? It's hard to get used to Fidelity National Information Services paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.
Wondering what the future holds for Fidelity National Information Services? See what the 32 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
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