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When looking for dividend shares, most UK buyers zoom in on the FTSE 100 and FTSE 250. In any case, these are the biggest companies on the London Inventory Change. And measurement generally is a useful benefit in sustaining shareholder payouts.
Nevertheless, there’s an entire world of dividend alternatives to discover exterior the FTSE 350. And amongst these lies FDM Group (LSE:FDM), which presently presents a staggering 14.7% yield.
Its huge payout definitely caught my consideration. So is that this a inventory buyers ought to contemplate for their very own passive earnings portfolios?
A tough 4 years
A fast look at FDM Group’s inventory worth chart is all that’s wanted to understand one thing’s flawed. The shares have been caught on a downward trajectory since late 2021. And even in 2025, FDM shares have fallen by one other 56%.
What occurred?
As a fast crash course, FDM operates a consultancy enterprise mannequin. Which means at any time when a enterprise needs to execute a fancy IT challenge and desires some exterior experience, FDM comes alongside and supplies the required expertise in trade for a price.
The one bother is, larger rates of interest have triggered world finances cuts, handicapping demand for FDM’s providers. As of October, the corporate had 2,003 consultants deployed throughout its consumer roster. That’s lower than half of the 4,033 deployed in December 2021.
Revenues, earnings, and money move have all taken a success consequently. And with no clear restoration of market circumstances in sight, buyers have been leaping ship. However has the inventory in the end been oversold?
Alternative in consultancy?
FDM’s present predicament is way from excellent. Nevertheless, the autumn in FDM’s share worth is perhaps a bit overblown.
When it comes to the group’s monetary place, it’s really in a reasonably strong state. The stability sheet stays completely debt-free with simply over £40m of money sitting within the financial institution. And whereas working earnings’s nonetheless transferring within the flawed course, FDM stays a extremely cash-generative enterprise.
Having mentioned that, sustaining the 14.7% dividend yield’s undoubtedly turning into a problem. Its newest half-year report put the earnings per share at 5.7p. However the dividend paid was 6p per share. In different phrases, FDM’s presently returning extra money to shareholders than it’s making.
Within the quick time period, this might not be an issue. Suppose market circumstances enhance and money flows begin climbing once more. In that case, the group’s money reserves will allow FDM to bridge the hole. But when circumstances proceed to deteriorate, then dividends will ultimately need to be placed on the chopping block.
But this dividend minimize may already be baked into the share worth. With a price-to-earnings ratio of simply 8.9, buyers are seemingly anticipating little or no from this enterprise, making it a doubtlessly good restoration inventory if the cycle lastly begins ramping again up.
The underside line
All issues thought of, I believe a dividend minimize’s trying more and more possible. Its excessive yield means that even when payouts are slashed in half, there’ll nonetheless be a considerable 7.4% payout to take pleasure in.
Nevertheless, with different dividend shares already providing one thing related at a lot decrease danger, FDM shares aren’t on the high of my buying listing proper now. As a substitute, I’m exploring different non-FTSE 350 dividend alternatives.
