There are hundreds of FTSE income stocks to choose from in 2025. And some are offering pretty gorgeous dividend yields at dirt cheap prices.
For example, FDM Group (LSE:FDM) shares currently have a 15% payout for shareholders. And at a quick glance, its price-to-earnings ratio sits at just 8.7. That’s well below the industry average of 28. So why is the stock so cheap? And should investors be rushing to buy this seemingly dividend gold mine?
Digging deeper
Double-digit yields can be quite tempting. However, it’s critical to remember that dividends are not guaranteed. Management teams have full discretion over how much is paid out. And since these payments are typically funded by excess earnings, they’re susceptible to cuts.
In fact, FDM Group has already slashed its interim dividend by 40%, from 10p to 6p. And a big reason why the yield’s so high today is due to a painful 70% drop in share price over the last 12 months. What’s going on?
FDM Group specialises in IT and business consulting. It recruits, trains, and deploys specialists to other businesses to help with software development, project management and digitalisation, among other services.
However, with the current global economic landscape riddled with uncertainty, many large-scale projects have been put on hold or delayed. This, in turn, has drastically reduced demand for FDM’s services with fewer contract wins and slower project initiations.
The result has been a sharp decline in both revenue and earnings. Sales across the first six months of 2025 were slashed by 31%, from £140.2m to £97.3m. At the same time, underlying pre-tax profits collapsed by 49%, from £17.7m to £9m. And since dividends are ultimately funded by excess earnings, management had to cut shareholder payouts to preserve cash in the ongoing uncertain operating environment.
Needless to say, that’s not good news. And it certainly suggests that the 15% yield, while attractive, is likely a trap.
Potential for a turnaround?
Despite its precarious situation, there’s still some room for optimism when looking at this business.
Management has highlighted early signs of recovery with a modest uptick in client demand earlier this year. There are ongoing discussions with clients, including the UK government, for opportunities within the public sector. And with a debt-free balance sheet, the group does have some financial resilience to weather the storm.
At the same time, FDM has been improving its upskilling efforts for its consultants, particularly surrounding artificial intelligence (AI), ahead of an expected market recovery. As macroeconomic and geopolitical uncertainties subside, demand for specialists is likely to rebound, particularly among firms embracing AI and digital modernisation. And this tailwind could propel this business back to its former glory.
In other words, FDM Group might not just be a high-yield income stock, but a discounted value stock as well.
However, when this recovery will take place remains a complete mystery. And with other FTSE income opportunities to explore, investors may earn better returns considering other stocks.
