Dividend Dynamo FinTech Stock Thrives in Economic Downturns

Fidelity National Information Services (NYSE: FIS), a leader in bank technology, has refocused on its core processing roots after selling a 55% stake in Worldpay to Global Payments (NYSE: GPN) for $24.25 billion to reduce debt and bolster stability. 

Trading below $80, FIS is 12% below its $88 fair value, offering 13% upside. Its sticky banking operations and ability to capitalize on depressed macroeconomic conditions through enhanced risk profiling position it to outperform peers like Fiserv (NYSE: FI).

Next Frontier (Sponsored)

Forget Tesla – This Could Be Bigger

Every investor in America is trying to figure out what Musk will do in Washington, D.C., in the coming weeks.

One Boston-based think tank – who has studied Elon’s work for decades – is stepping forward to share what they’ve found.

They believe his TRUE plan is far more radical than anyone realizes. It could change the way you live, work, get paid, and collect Social Security…

...AND could make more people rich than all of Elon's previous ventures – PUT TOGETHER.

Full story here.

Strategic Positioning and Competitive Edge

The longstanding Fintech company’s banking segment, now its primary focus post-Worldpay sale, enjoys a wide moat from near-99% customer retention and multiyear contracts, driven by mission-critical core processing systems. These systems, integral for bank deposits and loans, deter switches due to retraining costs and disruption risks. 

Its capital markets segment, serving investment firms, adds stability with 3-5-year contracts. 

In downturns, FIS’s analytics tools, such as fraud detection and loan risk profiling, gain traction as banks tighten credit standards, boosting demand. The Worldpay sale cut debt substantially, lowering debt/adjusted EBITDA to 2.7x, while FIS gains GPN’s issuer business, helping expand its banking service scope.

Financial analytics firms like FIS thrive in economic downturns as banks face heightened credit risks. FIS’s core processing and analytics platforms enhance loan risk profiling, fraud detection, and compliance, critical when defaults rise. 

In 2024, FIS’s fraud prevention tools saved clients $1.2 billion, with demand surging as economic uncertainty grew. Unlike peers reliant on transaction volumes, FIS’s subscription-based banking revenue ensures stability, making it a safe haven in volatile markets.

New Methods (Sponsored)

Bitcoin Skimming: A Game-Changer for Investors

Bitcoin’s ups and downs have made and lost fortunes. But what if there was a way to outperform BTC—without ever buying it?

Hedge fund titan Larry Benedict has revealed a new approach called "Bitcoin Skimming," a strategy that has outpaced Bitcoin’s returns by as much as 22-to-1.

With the SEC’s latest decision set to shake up crypto markets, now is the perfect time to discover how this works.

Click here to see the full details before this opportunity disappears.

Financial Outlook and Valuation

FIS’s 2024 free cash flow of $1.8 billion supports a $0.36 quarterly dividend and $2 billion in share repurchases. Despite a 4% revenue CAGR forecast through 2029, cost reductions offset Worldpay’s deconsolidation, with adjusted EBITDA margins expected to rise 40 basis points annually. 

At a 2025 P/E of 15.2x, FIS is undervalued versus Fiserv (18x). An $88 fair value, based on stable banking revenue and modest margin gains, implies 13% upside. Difficulty integrating GPN’s issuer business may temper short-term sentiment, but FIS’s cash flow strength mitigates risks.

Dividend Profile

The company’s quarterly dividend of $0.36 per share, or $1.44 annually, yields 1.9% at current prices. The dividend is secure with a healthy and sustainable 50% payout ratio with $1.8 billion in free cash flow, though growth is modest (3% CAGR over five years). Share repurchases take precedence, with $2 billion planned for 2025, enhancing EPS growth and maximizing shareholder value.

Bear Case

Banking sector weakness could delay tech upgrades, slowing FIS’s growth. Large bank clients may demand pricing concessions, squeezing margins. The company’s issuer business acquisition may take some time to fully integrate, increasing costs, while the company increases efficiencies. Macroeconomic volatility could also dampen capital markets segment performance if investment activity slows, though, of course, its core banking analytics services could offset those losses.

Outlook and Price Target

FIS’s refocused bank tech operations, fortified by the Worldpay sale, offer stability and growth in downturns. Its analytics prowess, sticky contracts, and debt reduction enhance resilience, while buybacks and dividends reward shareholders. At $77.71, FIS is a value play with steady upside in a turbulent market.