With a massive 14.2% dividend yield, FDM Group Holdings (LSE:FDM) seems to offer one of the biggest shareholder payouts in the FTSE today. This enormous dividend yield stems from a pretty abysmal performance during the last 12 months, that’s seen the share price crumble by over 66%.
Such a steep decline doesn’t usually happen unless something has seriously gone wrong. But every once in a while, such volatility can actually signal opportunity as fleeing investors overlook hidden quality despite the challenges. And buying quality when everyone else is selling can deliver exceptional returns in the long run.
So is FDM Group one of these exceptions? Or should investors steer clear?
What happened?
As a quick reminder, FDM’s an IT consultancy group that operates a recruit-train-deploy (RTD) business model. The firm focuses on providing clients with the necessary talent on a project-by-project basis for endeavours such as software development and digitalisation, among other things.
Sadly, in recent years, demand for FDM’s talent pool has been slowly shrinking. Increasing uncertainty regarding economic conditions, paired with higher interest rates, has resulted in a lot of customer projects being put on hold or outright cancelled.
Even with interest in technologies like artificial intelligence (AI) spiking, this hasn’t been sufficient to offset the loss of other contracts. As such, it ended 2024 with only 2,578 consultants actively placed with clients, down from 3,892 at the end of 2023. And with market conditions remaining shaky in 2025, the group’s interim results showed similar levels of decline, with revenue shrinking 31%.
Needless to say, that doesn’t exactly point towards a thriving business, putting a significant dampener on investor sentiment.
A turnaround opportunity?
As previously mentioned, weak investor sentiment can sometimes create buying opportunities for those focused on the long run. And to FDM’s credit, it does have a few levers it can pull to weather the storm.
The RTD model is naturally flexible, with management able to easily ramp up/down talent intake as market conditions evolve. In other words, once macroeconomic conditions improve and client demand for FDM’s expertise returns, the group will be able to quickly adapt.
That provides some nice operating leverage to fuel a recovery. And with the business operating in a sector where long-term demand for software, data, and cybersecurity specialists remains intact, it certainly points towards the presence of some comeback potential.
Therefore, investors should keep an eye out for when net consultancy placements turn positive again.
The bottom line
FDM shares currently offer an enormous dividend yield. But after taking a step back, I remain untempted.
The business certainly has some encouraging recovery potential once macroeconomic conditions improve. However, most consensus forecasts suggest the group’s lacklustre performance may have further to fall. And with management having already executed a dividend cut, continued weakness may see further declines in shareholder payouts in the near future.
That’s why I think investors are better off looking elsewhere for lucrative passive income opportunities to research right now.
