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With an enormous 14.2% dividend yield, FDM Group Holdings (LSE:FDM) appears to supply one of many greatest shareholder payouts within the FTSE at the moment. This monumental dividend yield stems from a fairly abysmal efficiency over the last 12 months, that’s seen the share worth crumble by over 66%.
Such a steep decline doesn’t normally occur until one thing has critically gone fallacious. However each every so often, such volatility can truly sign alternative as fleeing traders overlook hidden high quality regardless of the challenges. And shopping for high quality when everybody else is promoting can ship distinctive returns in the long term.
So is FDM Group certainly one of these exceptions? Or ought to traders steer clear?
What occurred?
As a fast reminder, FDM’s an IT consultancy group that operates a recruit-train-deploy (RTD) enterprise mannequin. The agency focuses on offering purchasers with the mandatory expertise on a project-by-project foundation for endeavours resembling software program improvement and digitalisation, amongst different issues.
Sadly, in recent times, demand for FDM’s expertise pool has been slowly shrinking. Growing uncertainty concerning financial circumstances, paired with increased rates of interest, has resulted in a number of buyer tasks being placed on maintain or outright cancelled.
Even with curiosity in applied sciences like synthetic intelligence (AI) spiking, this hasn’t been ample to offset the lack of different contracts. As such, it ended 2024 with solely 2,578 consultants actively positioned with purchasers, down from 3,892 on the finish of 2023. And with market circumstances remaining shaky in 2025, the group’s interim outcomes confirmed related ranges of decline, with income shrinking 31%.
For sure, that doesn’t precisely level in direction of a thriving enterprise, placing a big dampener on investor sentiment.
A turnaround alternative?
As beforehand talked about, weak investor sentiment can typically create shopping for alternatives for these centered on the long term. And to FDM’s credit score, it does have a couple of levers it might probably pull to climate the storm.
The RTD mannequin is of course versatile, with administration capable of simply ramp up/down expertise consumption as market circumstances evolve. In different phrases, as soon as macroeconomic circumstances enhance and shopper demand for FDM’s experience returns, the group will be capable to shortly adapt.
That gives some good working leverage to gas a restoration. And with the enterprise working in a sector the place long-term demand for software program, knowledge, and cybersecurity specialists stays intact, it definitely factors in direction of the presence of some comeback potential.
Due to this fact, traders ought to hold a watch out for when web consultancy placements flip constructive once more.
The underside line
FDM shares presently provide an unlimited dividend yield. However after taking a step again, I stay untempted.
The enterprise definitely has some encouraging restoration potential as soon as macroeconomic circumstances enhance. Nonetheless, most consensus forecasts counsel the group’s lacklustre efficiency might have additional to fall. And with administration having already executed a dividend lower, continued weak spot may even see additional declines in shareholder payouts within the close to future.
That’s why I feel traders are higher off trying elsewhere for profitable passive earnings alternatives to analysis proper now.
