Last update on 2024-06-27

Fidelity National Information Services (FIS) - Dividend Analysis (Final Score: 4/8)

Comprehensive analysis of Fidelity National Information Services (FIS) dividend performance using an 8-criteria scoring system. Final score: 4/8.

Short Analysis - Dividend Score: 4

We're running Fidelity National Information Services (FIS) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The analysis of Fidelity National Information Services (FIS) based on an 8-criteria scoring system results in a dividend score of 4. Here's a summary based on the criteria: 1. **Dividend Yield**: FIS has a high dividend yield of 3.46% in 2023, which is much higher than the industry average of 1.12%. This is beneficial for income-focused investors. 2. **Dividend Growth Rate**: FIS has not maintained a stable 5% dividend growth rate over the past 20 years due to significant volatility. 3. **Payout Ratio**: FIS's average payout ratio is 152.81% over the past 20 years, which is higher than the desired 65%, indicating sustainability issues. 4. **Dividends Covered by Earnings**: FIS has mixed results with recent negative EPS showing concern for sustaining dividends. 5. **Dividends Covered by Cash Flow**: While recent trends show dividends are covered by cash flow, it does not offer a large margin of safety. 6. **Stable Dividends**: FIS has shown stable dividends without drops over the past 20 years, showcasing financial health. 7. **Dividends for Over 25 Years**: FIS falls short by having dividends only for 19 years, lacking the 25-year reliability. 8. **Stock Repurchases**: Not fully discussed, but generally a positive indicator if done consistently.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Fidelity National Information Services (FIS) has some strong points like a high dividend yield and stable dividend payments without major drops, making it a potential option for income-focused investors. However, there are significant concerns like high volatility in dividend growth, an unsustainable payout ratio, and recent issues with earnings covering dividends. The company also lacks the 25-year history of paying dividends which indicates long-term reliability in dividend payments is not proven. Overall, it may be worth looking into FIS for dividend income but requires cautious consideration of its sustainability and stability issues before investing.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

A high Dividend Yield indicates that a company returns a significant portion of its earnings to shareholders in the form of dividends, compared to its stock price. It is a critical indicator of income potential for investors.

Fidelity National Information Services (FIS) has a dividend yield of 3.4626% for 2023, considerably higher than the industry average of 1.12%. Historically, FIS's dividend yield has seen considerable fluctuation, particularly in 2008 with an unusual spike to 102.6429%. For much of the past two decades, the yields were relatively modest, often below 2%. This recent yield surge can be beneficial for income-focused investors. Furthermore, while the stock price has shown significant growth over the years—from $32.8 in 2003 to $60.07 in 2023—the higher dividend yield now suggests a stronger commitment to returning value to shareholders. Given its current yield's relative strength against the industry average, the trend is positive for income-seeking investors. Still, one must consider the historical volatility seen in dividend yields before deeming it a consistently good performance metric.

Average annual Growth Rate higher than 5% in the last 20 years?

The dividend growth rate is a key indicator of a company's financial health and its ability to consistently return value to shareholders. A growth rate above 5% suggests a strong, expanding business.

Based on the provided dividend per share ratio for the last 20 years, Fidelity National Information Services (FIS) has shown substantial volatility. The dividend per share ratio varies widely from significant positive percentages to negative values and zeros. Calculating a consistent 5% growth rate is challenging due to this inconsistency. The average dividend ratio at approximately 497% seems superficially impressive but reflects erratic behavior rather than stable growth. Therefore, FIS does not meet the criterion of maintaining a stable dividend growth rate higher than 5% over the past 20 years, indicating a less reliable dividend policy for long-term investors.

Average annual Payout Ratio lower than 65% in the last 20 years?

The payout ratio indicates the percentage of a company's earnings paid out as dividends. A payout ratio below 65% is typically seen as sustainable.

Fidelity National Information Services (FIS) has had an average payout ratio of approximately 152.81% over the last 20 years. This is significantly higher than the ideal threshold of 65%, indicating potential sustainability issues. Specifically, years like 2006 (288.45%), 2008 (1504.37%), 2019 (209.05%), and 2020 (548.37%) show particularly high payout ratios, and the negative values in recent years (2022: -6.79%, 2023: -18.47%) suggest either financial distress or accounting anomalies. Overall, this trend is concerning for long-term dividend sustainability.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings.

Fidelity National Information Services (FIS) shows a mixed trend in terms of coverage of dividends by earnings. Over the past two decades, the observable Earnings per Share (EPS) shows a volatile trend, with a notable declining spike in recent years. FIS witnessed an alarming negative EPS of -27.6821 in 2022 and -11.2589 in 2023, leading to a negative ratio for dividends per share covered by EPS. While in earlier years like 2017, it had a decent coverage of 0.295, indicating the earnings were almost three times the dividends. The sudden negative trend in recent years and a high cover ratio peaking to over 5 in 2021 raises concerns and indicates instabilities. Overall, FIS's earnings situation is currently poor, which is a bad trend for sustaining dividend payments.

Dividends Well Covered by Cash Flow?

This criterion measures the extent to which the company's free cash flow can support its dividend payments.

For Fidelity National Information Services (FIS), examining the relationship between free cash flow and dividend payouts from 2003 to 2023 yields mixed conclusions. The metric 'Dividend covered by Cashflow' started at a low rate of around 3% in 2003, then improved substantially in subsequent years but remained below the 100% ideal mark until recent years. For 2022 and 2023, the percentage is approximately 44.6% and 38.3%, respectively, indicating that while free cash flow does support dividend payments, there is not an excessively large margin of safety. The highest coverage ratio is noted for the year 2022 at 44.6%. In more specific terms, free cash flow of $3,213 million in 2023 covered dividend payments of $1,231 million. This is a good sign, reflecting a sustainable dividend funding model, albeit still less than ideal for long-term risk mitigation. However, the trend remains positive when viewed over the two-decade span.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years indicate a company's solid financial health and reliability, which is highly significant for income-seeking investors.

Analyzing the dividend per share data for Fidelity National Information Services (FIS) over the past 20 years, there are no instances where the dividend per share dropped by more than 20%. The data shows continuous and significant growth, with the dividend increasing from a mere $0.1 in 2003 to $2.08 in 2023. This trend demonstrates the company's robust dividend policy and strong financial performance. Stability in dividend payments is crucial for income-oriented investors, and FIS meets this criterion exceptionally well, making it a favorable choice for such investors.

Dividends Paid for Over 25 Years?

A company's history of paying dividends for over 25 years showcases its commitment to returning value to shareholders and demonstrates financial stability over a long period.

Fidelity National Information Services (FIS) does not meet the criterion of having paid dividends for over 25 years continuously. According to the provided data, FIS started paying dividends in 2004. Although there have been consistent payments and increases since then, this 19-year span falls short of the 25-year mark, signalling that FIS still needs a few more years of sustained dividend distributions to meet this benchmark. While the company's recent history signifies a positive trend toward consistent and growing dividend payments, it hasn't yet established the long-term reliability that a 25-year record would imply.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Fidelity National Information Services (FIS) and why it is important to consider

Stock repurchases refer to when a company buys back its own shares from the marketplace, usually because management believes the shares are undervalued. This can be important as it can signify the management's confidence in the company's future prospects, reduce the number of shares outstanding, and often signal that the company has excess cash. Fidelity National Information Services (FIS) should be evaluated on this criterion due to its impact on share value and shareholders' returns.