One dividend stock I'd buy right now, and one I'd avoid

Investor appetite for Fidessa(LSE: FDSA) has failed to meaningfully recover after the IT services giant's chilling trading statement in April.

The company's share price descent cannot be described as catastrophic. But I expect its value to continue dropping in the weeks and months ahead.

In its spring update Fidessa announced that while it "continues to see structural and regulatory drivers within the market, the increasing number of European elections, the forthcoming Brexit negotiations and the establishment of the new US administration are clearly creating some uncertainty."

This environment had seen a number of its customers delay decisions during the first quarter, Fidessa advised. And given that the political malaise on both sides of the Atlantic is intensifying, I reckon its next financial update (half-year numbers are scheduled for July 31) could prompt another sharp fall.

Projections in peril?

In this tricky environment the City expects the Woking business to endure a 1% earnings slip in 2017, although clearly this estimate is in danger of being downgraded should market conditions indeed remain difficult. And this scenario puts Fidessa's perky dividend projections in serious jeopardy, in my opinion.

The trading, investment and information services provider is expected to pay a total dividend of 92.1p per share this year, creating a market-beating yield of 3.9%. However, this projection is barely covered by predicted earnings of 92.8p.

And the situation does not improve much for next year, either. A projected 10% earnings improvement, to 101.6p, also barely covers an anticipated dividend of 95.8p (which creates a 4% yield).

I believe those seeking chunky dividends in the near term and beyond can find much safer picks elsewhere, and certainly ones which carry much better value -- Fidessa currently boasts a forward P/E ratio of 25.7 times, sailing above the broadly-considered value watermark of 15 times.

Pumping powerhouse

I am far more optimistic over the investment outlook over at Flowtech Fluidpower (LSE: FLO), particularly after this month's latest trading update.

The builder of hydraulic, pneumatic and industrial instruments saw revenues detonate 24.7% in January-June, it advised. Flowtech continues to enjoy rampant demand across its businesses, with solid organic growth supplemented by the positive impact of recent acquisitions. And the likelihood of further M&A action should keep revenues on an upward tilt. The firm snapped up OCL, a specialist in the movement and storage of fuels, liquids and gases, earlier in July.

So it comes as little surprise that the Square Mile expects earnings to keep sparking higher.

A 29% bottom-line rise is predicted for 2017, a forecast that is expected to push the dividend from 5.51p per share last year to 5.8p. Not only does this create a handsome 4.3% yield, but also leaves the anticipated reward well covered -- indeed, coverage of 2.3 times sails above the safety benchmark of two times.

And the good times are predicted to roll into 2018, an estimated 5% earnings rise is expected to drive the dividend to 6.1p. The yield for next year subsequently stands at 4.5% and dividend cover is retained at 2.3 times.

With Flowtech also dealing on a multiple of 10.3 times forward earnings, I reckon value-hungry investors need to give the Skelmersdale business a close look.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Fidessa. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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