Among these stands FDM Group (LSE:FDM), with an impressive dividend yield of 11.7%! But is this too good to be true? Or is it a rare chance for investors to lock-in a double-digit passive income stream?

Inspecting the business

In a world of higher interest rates, businesses and governments are far more selective about where they deploy their capital. And this has translated into a massive list of projects being delayed, downsized, or even outright cancelled.

This has been particularly bad news for FDM Group, which specialises in supplying talent-as-a-service within the IT sector. The firm helps fill any knowledge gaps that enterprise customers need to implement or execute a project. But with most projects being scaled back, demand for FDM’s talent has plummeted.

In 2025, the number of consultants deployed shrank from 2,578 to 2,003 year on year. And looking further back, the drop is even more painful, with over 4,000 consultants placed with clients in 2021.

The result?

A painful 33.4% drop in revenue and a 69.2% collapse in adjusted pre-tax profits over the last four years. With that in mind, it’s not surprising to see the FDM share price struggle, driving up the dividend yield to enormous yields.

Are the winds changing?

As alluring as the group’s dividend yield seems, it’s essential for investors not to be tricked. Weaker sales and earnings throughout 2025 have translated into a 40% dividend cut. And looking at the full-year payout projections from analysts, FDM’s true yield is actually closer to 6%.

However, that’s still pretty substantial. And despite posting weaker earnings for 2025, FDM shares are actually up almost 20% since the start of 2026.

What’s going on?

The last four months of the year showed early signs of a cyclical shift in IT project spending. And this early momentum has continued into 2026, potentially placing FDM Group and its earnings on the road to recovery, with its dividends potentially on track to follow.

If that’s the case, investors could indeed still be looking at a lucrative passive income stock, with a cash-rich balance sheet and no debt.

What’s the verdict?

Even with encouraging early signs of a rebound, I’m not overly confident about FDM Group’s long-term prospects. While there’s no denying management has navigated through tough market conditions admirably, the long-term demand for IT consultants is currently under major disruption threats from evolving AI models.

The business may be forced to drastically pivot to avoid becoming obsolete in the coming years. And while this could prove successful, there’s nonetheless enormous execution risk involved. In the meantime, there are other income stocks offering similar yields whose future isn’t shrouded in such extreme uncertainty.

That’s why I’m hunting for dividend opportunities elsewhere.

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What’s more, even with a relatively small lump sum of £5,000, it’s possible to start earning a decent annual payout of £700. That’s a 14% yield, far more than what even the most generous Cash ISAs offer today. Here’s how.

Turning £5,000 into £700 a year

After generating some superb returns in 2025, the FTSE 100 index currently only offers a yield of around 2.9%. The FTSE 250 is a bit more generous at 3.3%, but that too still falls short of the target 14%. For reference, in terms of money, at these rates, relying on index funds would only generate a £145-£165 annual passive income.

To aim higher, investors have to turn to a stock-picking strategy. That way, they can invest in the specific companies that offer much higher yields… like FDM Group (LSE:FDM) with its 14.3% payout – enough to generate £715 each year overnight.

Yield versus risk

As a quick introduction, FDM’s a consultancy group focused primarily on the IT sector. When businesses launch complex projects, FDM offers a helping hand by sending talented professionals to assist with their implementation, design, and execution.

The only trouble is, in recent years, with most businesses cutting back on non-critical spending, demand for its services has suffered considerably, with less than half the number of consultants deployed today versus four years ago.

Consequently, revenues and cash flows have collapsed along with its share price. And consequently, despite seemingly offering a substantial yield, a dividend cut has already been announced.

Put simply, FDM Group’s a perfect example of a yield trap.

A better strategy?

However, looking ahead, FDM’s fortunes could improve. IT consulting is ultimately a cyclical enterprise, and with over 30 years’ experience, the company’s no stranger to navigating tough downturns. The fact that management’s prepared the balance sheet to be cash-rich and debt-free supports this even further.

But what about the goal of earning a 14% yield? Companies like FDM with enormous payouts almost always come with extreme levels of risk. Therefore, in my experience, a far more effective and lower-risk strategy is to find the companies that may not have a high yield today, but can continuously grow their dividend over time.

A perfect recent example of this would be Safestore (LSE:SAFE). By generating consistent and recurring cash flows from renting extra storage space to businesses and consumers alike, earnings have been steadily compounding over the years.

The result has been 15 years of consecutive dividend hikes. And that means anyone who invested £5,000 in 2011 isn’t earning a 14% yield today but rather a 22.8% yield, enough to generate £1,140 passive income.

Like FDM, Safestore still has its risks. Self-storage demand’s similarly cyclical and heavily tied to the home renovation market, which isn’t exactly thriving right now.

Nevertheless, the business continues to generate reliable cash flows from a service that seems likely to stick around for several more decades. So for investors seeking to earn a substantial long-term passive income, Safestore shares could be worth investigating further.

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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.

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However, every once in a while, a surprising exception emerges. Investors can underestimate a business, send its share price crashing and the yield flying, only for it to then suddenly bounce back, making the smart investors who spotted the opportunity a lot of money.

Today, FDM Group (LSE:FDM) seems to satisfy the first half of this narrative. Its share price is down a whopping 60% since January, and the dividend yield now sits at 14.6%. The only question is, can it deliver the rare explosive comeback that could make investors today much richer?

What’s behind the fall?

As a quick crash course, FDM Group’s an IT consultancy business. It hires fresh university graduates, upskills them in mission-critical technologies like cloud computing and cybersecurity, then ‘leases’ out this talent to businesses as well as governments.

In a world of constant innovation and technological complexity, having the right know-how’s essential. But the trouble is, demand’s only as strong as its customers’ wallets. And right now, with all the economic uncertainty, small- and medium-sized businesses are seemingly reluctant to invest in new IT systems.

For FDM, this has been a bit of a disaster. The number of its consultants assigned to clients has drop 37% year on year across the first half of 2025. Combined with a lack of new contract growth, revenue over the period tumbled 31% with pre-tax profits taking an even harder 48% hit.

With that in mind, seeing a sharp sell-off in the share price isn’t very surprising.

A hidden opportunity?

As a result of this performance slump, FDM Group shares now trade at a pretty undemanding price-to-earnings ratio of 9. And with the stock near a 52-week low, the company’s now firmly within value territory, especially if its recent stumbles are cyclical rather than structural.

IT modernisation, digitalisation, and cybersecurity remain long-term priorities for both businesses and governments alike. And should the economic landscape improve over time, demand for FDM’s talent pool could bounce back with the potential for rapid margin recovery.

In the meantime, its balance sheet remains well funded with £34.6m of cash & equivalents with no debt in sight.

The bottom line

FDM’s sturdy balance sheet is an encouraging sign. But to maintain its high yield, the group’s cash flow needs to be sturdy as well. And right now, that’s simply not the case.

The group’s interim dividend has already been slashed due to weakened earnings. And with a cyclical rebound not expected until as early as mid-2026, there’s a good chance of another dividend cut on the horizon, in my opinion.

That’s why, for now, FDM’s staying on my watchlist, and I’m hunting for other income shares instead.

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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.

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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.

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Sadly, I think this is increasingly likely for a number of FTSE 250 members… but not all.

Primed for a cut?

Investment firm abrdn (LSE: ABDN) is one example where the income stream looks scarily excessive. Right now, shares have a forecast yield of 9.5%. For perspective, the FTSE 250 has a yield of 3.9%. So yes, I’d be getting a lot more than I would from a fund that merely tracks the index. But just how much risk would it involve?

Based on its recent half-year results, I think quite a lot. A pre-tax loss of £169m was reported as investors pulled their money from shares to sit in cash. That’s an improvement on the £326m loss in H1 2022 but hardly worth shouting about.

If this trend continues, I fear for the dividend. What’s more, another cut (payouts were last reduced in 2020) could put further pressure on a stock that is down nearly 20% already in 2023.

Courage required

In abrdn’s defence, the financial sector isn’t popular with investors at the moment. So there’s certainly an argument for thinking that a lot of negativity is priced in. In fact, a brave contrarian could possibly make a mint when the next bull market kickstarts. And one thing we do know is that markets have always recovered.

The trouble is, that could still be some way off. I’m not sure I’d want to lock up my hard-earned cash with Abrdn in the meantime.

Heavy faller

IT services provider FDM Holdings (LSE: FDM) is another FTSE 250 member whose dividend stream appears to be built on shaky foundations. It currently boasts a forecast dividend of 8.6%.

Once again, at least some of this is due to a plunging share price. Having set a record high just over two years ago, the company’s value has since crashed by around 70%!

I’m quite surprised by the scale of this drop. After all, FDM reported in July that revenue had climbed 18% to almost £180m in the first six months of 2023. Pre-tax profit also jumped 34% to nearly £30m.

That doesn’t sound like a business in crisis to me.

Better buy?

To be fair, the company did say ongoing geopolitical uncertainty “continues to disrupt the buying patterns of some clients“. Management also commented on a skills shortage “in all regions” in which operates. So even though FDM expects to deliver on market expectations for the full year, it’s clear there are some headwinds to trading. This helps to explain why the interim dividend was maintained at 17p per share rather than hiked.

Despite this pause, analysts are predicting that the payout will still barely be covered by profit. For this reason, I’m certainly not going to rule out a cut.

Notwithstanding this, the company has no debt and a history of generating great margins, free cash flow and returns on capital employed. These are just the sort of things I look for.

Personally, I would feel more comfortable buying this stock over abrdn, especially as both stocks trade at around the same valuation (12 times earnings).

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FTSE 250 wealth-builder

IT services provider FDM Group (LSE: FDM) is unlikely to make headlines. The company recruits and trains graduates, ex-services personnel and those wanting to return to work in technical skills. In return for this instruction, FDM’s consultants — otherwise known as Mounties — then work for the £1.2bn cap for a minimum of two years. 

From an investment perspective, this business model was never going to compete with glitzy tech stocks whose share prices have shot the lights out over the pandemic. Nevertheless, anyone buying FDM’s stock in March 2020 will have seen their holding more than double in value. That’s a superb return. It’s also far better than the 33% or so seen in the FTSE 250 as a whole.

The shares are rising again today following the release of FDM’s latest set of interim results. 

Rising demand

Revenue may have fallen 7% to £131.3m over the first six months of 2021, but it’s important to put this in context. FDM had a great Q1 before Covid-19 arrived in 2020. This means that the number of Mounties being deployed so far in 2021 always had the potential to be lower. 

Moreover, some regions seem to be doing better than others. Collectively, revenue growth of 15% was logged for Europe, the Middle East and Africa. In the Asia Pacific region, a 24% jump was seen. On the flipside, demand in the US had been “more subdued“. 

Pre-tax profit fell 3% to £20.5m. That said, the latter was actually 9% higher (at £22m) on an adjusted basis.

Perhaps most tellingly, the FTSE 250 member stated that it had significantly increased recruitment and training levels over the first six months of 2021 to meet demand. As a potential investor in a forward-looking market, this is the sort of signal I’m hunting for. I also like the fact that 31 of 37 new clients come from outside of financial services, helping to diversify earnings across sectors.  

Frothy valuation

Signing off today’s statement, CEO Rob Flavell said that FDM was “well placed” to hit expectations for its full year. This suggests there could be further upside to the FDM share price, especially if operations in the US bounce back to form. 

For balance, however, it’s worth considering a few risks.

One that jumps out at me is the current valuation. Before markets opened this morning, FDM shares were trading on a heady forward earnings multiple of 36. Now, I think the company’s consistently high returns on capital and margins go some way to supporting this. FDM also boasts a solid balance sheet, which is more than you can say for some stocks in the FTSE 250.

Even so, I can’t deny that the recovery in business looks pretty priced in. And as Boris Johnson continually stresses, we’re not in the clear just yet. Any disappointing results could send the shares downwards.

Watchlist addition

I doubt this FDM will ever set the market on fire. Assuming I wasn’t attempting to grow my portfolio at a faster clip at potentially greater risk, however, I’m inclined to regard FDM as a decent addition to a suitably diversified portfolio.

For now, it stays on my watchlist until a potentially better entry point appears.

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I’m not keen on paying over the odds for my shares, so I’ve been hunting for bargain UK tech stocks that still look cheap enough to offer the potential for big gains. I’ve unearthed three tech stocks I want to own.

Too cheap to ignore?

Shares in price comparison website Moneysupermarket.com Group (LSE: MONY) have lagged the market this year, due to a pandemic-related slowdown in sales. However, although earnings are expected to slump in 2020, analysts expect a strong recovery in 2021.

Is that realistic? I think so. The main areas where Moneysupermarket has suffered this year have been travel insurance and personal finance. No one has been travelling outside the UK and banks have been cutting bank on new loans, due to concerns about the economy.

I expect both of these headwinds to ease by next summer. Meanwhile, the firm is targeting growth opportunities such as mortgage lending and providing its services to commercial partners, such as banks.

Looking ahead, MONY shares trade on around 16 times 2021 forecast earnings, with a dividend yield of 4.6%. Moneysupermarket has no debt and delivers profits margins of about 30%. I think this UK tech stock is too cheap and I’ve been buying it for my portfolio.

I’d back owner management

IT services group FDM Holdings (LSE: FDM) provides business and technical experts to work on client sites. These are called ‘Mounties’ by the firm. To give you an idea of scale, the company had 3,721 Mounties placed with clients at the end of September.

One of the things I like about this business is it’s run by owner management. CEO Rod Flavell and chief operating office Sheila Flavell own around 15% of the business between them. That gives them a collective stake worth around £170m. I reckon they should be motivated to deliver strong shareholder returns.

FDM is a profitable business too. The group’s operating profit margin has averaged more than 18% in recent years and cash generation is good. Although last year’s dividend was cut, analysts expect a payout of 34p per share this year, giving a useful 3.3% yield.

Broker forecasts suggest a return to earnings growth in 2021. I’m happy to keep holding and buying FDM shares.

The next UK tech stock I’ll buy?

The final company I want to look at is FTSE 100 accounting software group Sage (LSE: SGE). It disappointed investors recently when it warned profits could dip in 2021.

Sage’s share price has fallen more than 15% over the last month. That’s left the shares trading at a level last seen when the stock market crashed in March.

I think this negative sentiment has gone too far. Sage is continuing to make good progress converting customers to its cloud-based subscription services. This is limiting growth today. But, in future years, I expect the firm’s recurring revenue to support reliable, growing profits.

The company is also increasing its spending on new products and services. For a tech business, I generally see that as a good thing. Anyone who doesn’t innovate gets left behind.

Sage has a long track record of high profit margins and strong shareholder returns. I’m hoping to use the current lull to add some Sage stock to spice up my portfolio.

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That’s where this FTSE 250 stock comes into play.

The opportunity

FDM Group (LSE:FDM) operates in the recruit, train, and deploy sector, or more specifically, helps individuals – such as graduates and ex-military – gain the necessary training and experience to thrive in their careers.

The firm specialises in a wide array of technical services from software development and testing to cybersecurity and robotic automation.

After recruiting and training individuals through the firm’s academies around the world, the company deploys them at its ever-expanding portfolio of sites within its client’s businesses.

The FTSE 250 stock charges its customers with consulting fees. In exchange, businesses receive new talent to drive their business forward without having to do any in-house training of their own.

While training and consulting is hardly a flashy sounding business model, the performance of the company has continued to impress shareholders since its 2014 IPO with a return of 226%!

The financials

Each year has been a continual improvement on the last, with revenue and operating profit increasing year-on-year by an average of 14% and 15%, respectively.

What I find truly compelling is the incredibly high return on equity (ROE) of over 50%! As a reminder, ROE is a measure of how efficiently a company is generating income from its equity financing – investors’ money. It should be noted that the jump in 2018’s ROE is actually as a result of an increase in debt levels rather than organic growth.

Looking at the return on invested capital (ROIC) gives more clarity into what is going on under the hood. ROIC is a measure of how efficiently a company is generating income from the capital it has invested in operations and growth. This shows a declining trend, and thus the firm’s returns from its investments have declined. However, an ROIC of 57% is still exceptionally high and provides further evidence of the company’s ability to grow investor wealth.

Both ROE and ROIC should be monitored in the future so that any signs of weaknesses emerging in the business model can be identified quickly.

The bottom line

The FTSE 250 stock is certainly not without competition. One such competitor is the software company Learning Technologies Group, which provides an alternative method for businesses to train their staff.

However, training personnel is a lengthy process, and FDM Group is capable of providing expert consultants at a moment’s notice. I believe this time-saving advantage, combined with both reduced training costs for clients, and FDM Group’s high-standing reputation gives it this FTSE 250 stock the edge needed to continue providing extraordinary returns.

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