Image source: Getty Images
When hunting for dividend stocks, most UK investors zoom in on the FTSE 100 and FTSE 250. After all, these are the largest businesses on the London Stock Exchange. And size can be a handy advantage in maintaining shareholder payouts.
However, there’s a whole world of dividend opportunities to explore outside the FTSE 350. And among these lies FDM Group (LSE:FDM), which currently offers a staggering 14.7% yield.
Its massive payout certainly caught my attention. So is this a stock investors should consider for their own passive income portfolios?
A rough four years
A quick glance at FDM Group’s stock price chart is all that’s needed to realise something’s wrong. The shares have been stuck on a downward trajectory since late 2021. And even in 2025, FDM shares have fallen by another 56%.
What happened?
As a quick crash course, FDM operates a consultancy business model. That means whenever a business wants to execute a complex IT project and wants some external expertise, FDM comes along and provides the required talent in exchange for a fee.
The only trouble is, higher interest rates have triggered global budget cuts, handicapping demand for FDM’s services. As of October, the company had 2,003 consultants deployed across its client roster. That’s less than half of the 4,033 deployed in December 2021.
Revenues, earnings, and cash flow have all taken a hit as a result. And with no clear recovery of market conditions in sight, investors have been jumping ship. But has the stock ultimately been oversold?
Opportunity in consultancy?
FDM’s current predicament is far from ideal. However, the fall in FDM’s share price might be a bit overblown.
In terms of the group’s financial position, it’s actually in a fairly robust state. The balance sheet remains entirely debt-free with just over £40m of cash sitting in the bank. And while operating income’s still moving in the wrong direction, FDM remains a highly cash-generative business.
Having said that, maintaining the 14.7% dividend yield’s definitely becoming a challenge. Its latest half-year report put the earnings per share at 5.7p. But the dividend paid was 6p per share. In other words, FDM’s currently returning more money to shareholders than it’s making.
In the short term, this may not be a problem. Suppose market conditions improve and cash flows start climbing again. In that case, the group’s cash reserves will enable FDM to bridge the gap. But if conditions continue to deteriorate, then dividends will eventually have to be put on the chopping block.
Yet this dividend cut could already be baked into the share price. With a price-to-earnings ratio of just 8.9, investors are seemingly expecting very little from this enterprise, making it a potentially perfect recovery stock if the cycle finally starts ramping back up.
The bottom line
All things considered, I think a dividend cut’s looking increasingly likely. Its high yield suggests that even if payouts are slashed in half, there will still be a substantial 7.4% payout to enjoy.
However, with other dividend stocks already offering something similar at much lower risk, FDM shares aren’t at the top of my shopping list right now. Instead, I’m exploring other non-FTSE 350 dividend opportunities.
