Consistent with its updated capital allocation strategy announced in November 2021, Fidelity National Information Services Inc. (FIS Quick QuoteFIS - Free Report) hiked its quarterly common stock dividend by 21% from the prior-quarter payout to 47 cents per share. The new dividend will be paid out on Mar 29, to its shareholders of record as of Mar 25, 2022.

Since March 2012, Fidelity National has raised its dividend eight times. Its dividend was last hiked in February 2021 by 11% to 39 cents per share. This reflects the FIS’s commitment to return shareholders’ funds with its strong cash-generation capabilities.

Based on the increased rate, the annual dividend came to $1.88 per share, resulting in an annualized dividend yield of 1.6%, considering Fidelity National’s closing price of $117.40 as of Jan 28. The yield is not only attractive to income investors but also represents a steady income stream.

Such capital-deployment activities are part of Fidelity National’s long-term strategy to boost shareholder value.

Investors interested in this currently Zacks Rank #3 (Hold) stock can have a look at its fundamentals and growth opportunities. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

FIS’ ability to sustain the hiked dividend depends on earnings growth. Fidelity National’s past performance depicts a robust earnings picture. Its earnings surpassed the consensus mark in all the trailing four quarters. Over the last five years, FIS’s earnings grew 10%, higher than the industry average of 8%. If this momentum continues in the upcoming period, such dividend payments will be sustainable going forward.

Fidelity National’s revenues witnessed a CAGR of 9.2% over the last five years (2016-2020). High recurring revenues from processing and maintenance, and several ongoing initiatives, its including digital strategy, are expected to drive revenue growth further.

Fidelity National’s capital-deployment activities are encouraging. In January 2021, a new share-repurchase program was approved under which FIS is authorized to repurchase up to 100 million shares of its common stock. As of Sep 30, 2021, 85 million shares remained available for buybacks.

Per its capital allocation strategy revised in November, Fidelity National is also boosting its expected annual dividend growth rate. Beginning with quarterly dividend payable in March 2022, the company aims to increase its annual dividend by around 20% per year, from the previous target annual dividend growth rate approximately 10%. This will result in incremental dividend payment of nearly $100 million in 2022. The amplified dividend growth rate will aid FIS to gradually accelerate its dividend payout ratio to nearly 35% of its adjusted net earnings over several years from nearly 25% in 2021.

FIS’ stock looks undervalued with respect to price-to-earnings ratio. It has a price/earnings (F1) ratio of 16.16 compared with the industry average of 16.41. Also, the price-cash flow ratio of 10.16 is below the industry average of 13.48.

Based on the above-mentioned positives, the stock seems worth holding on to. However, uncertain economy is a headwind. COVID-led lockdowns, particularly in certain areas of Europe and Brazil, and any related reduction in consumer spending will likely continue to dent Fidelity National’s merchant payments volume and the related transaction revenues. Thus, investors must consider these factors before making any decision.

Fidelity National’s shares have gained 3.4% in the past three months against a 3.3% decline recorded by the industry.

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Other Companies Undertaking Similar Action

Over the past few months, several companies have rewarded their shareholders with dividend hikes. Some of these are Farmers National Banc Corp. (FMNB Quick QuoteFMNB - Free Report) , United Bankshares, Inc. (UBSI Quick QuoteUBSI - Free Report) and The Community Financial Corporation .

Farmers National announced a 27.3% sequential hike in its quarterly dividend, taking the total to 14 cents per share. The dividend was paid out on Dec 31, 2021 to its shareholders of record as of Dec 10. This marked the sixth consecutive quarterly dividend hike by Farmers National. Prior to this, FMNB hiked its dividend 10% to 11 cents per share.

United Bankshares announced a dividend of 36 cents per share, representing a hike of 2.9% from the prior payout. The dividend was paid out on Jan 3, 2022, to its shareholders of record as of Dec 2, 2021.

Prior to this hike, UBSI had increased its quarterly dividend 2.9% to 35 cents per share in November 2019.

Community Financial announced a 17% sequential hike in its quarterly cash dividend. TCFC paid out a dividend of 17.5 cents per share on Jan 24 to its shareholders of record as of Jan 10.

TCFC’s management noted, "Our performance in the past year has been exceptional, despite many pandemic related challenges felt across the industry and Country. This increase in the quarterly dividend reflects the strong financial position of the Company and our continued commitment to returning value to shareholders."

Earlier in February 2021, Community Financial had hiked its dividend by 20% to 15 cents per share.