Picture supply: Getty Pictures
With an enormous 14.2% dividend yield, FDM Group Holdings (LSE:FDM) appears to supply one of many largest shareholder payouts within the FTSE at this time. This huge 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 except one thing has severely gone unsuitable. However each every now and then, such volatility can really sign alternative as fleeing buyers 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 one in every of these exceptions? Or ought to buyers 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 shoppers with the required expertise on a project-by-project foundation for endeavours resembling software program growth 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 plenty 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 adequate to offset the lack of different contracts. As such, it ended 2024 with solely 2,578 consultants actively positioned with shoppers, down from 3,892 on the finish of 2023. And with market circumstances remaining shaky in 2025, the group’s interim outcomes confirmed comparable ranges of decline, with income shrinking 31%.
Evidently, that doesn’t precisely level in the direction of a thriving enterprise, placing a major dampener on investor sentiment.
A turnaround alternative?
As beforehand talked about, weak investor sentiment can generally create shopping for alternatives for these targeted on the long term. And to FDM’s credit score, it does have just a few levers it might pull to climate the storm.
The RTD mannequin is of course versatile, with administration in a position to simply ramp up/down expertise consumption as market circumstances evolve. In different phrases, as soon as macroeconomic circumstances enhance and consumer demand for FDM’s experience returns, the group will be capable to shortly adapt.
That gives some good working leverage to gasoline 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 the direction of the presence of some comeback potential.
Due to this fact, buyers ought to preserve a watch out for when internet consultancy placements flip optimistic once more.
The underside line
FDM shares presently supply 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. Nevertheless, most consensus forecasts counsel the group’s lacklustre efficiency could have additional to fall. And with administration having already executed a dividend lower, continued weak point might even see additional declines in shareholder payouts within the close to future.
That’s why I feel buyers are higher off wanting elsewhere for profitable passive earnings alternatives to analysis proper now.
