Fiera Capital Corporation (TSE:FSZ) has announced that it will be increasing its periodic dividend on the 19th of December to CA$0.216, which will be 0.5% higher than last year's comparable payment amount of CA$0.215. This makes the dividend yield 8.9%, which is above the industry average.

Check out our latest analysis for Fiera Capital

Fiera Capital's Projections Indicate Future Payments May Be Unsustainable

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 142% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 68%. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

Earnings per share is forecast to rise by 45.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 105%, which probably can't continue without putting some pressure on the balance sheet.

Fiera Capital Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of CA$0.44 in 2014 to the most recent total annual payment of CA$0.864. This works out to be a compound annual growth rate (CAGR) of approximately 7.0% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Fiera Capital Might Find It Hard To Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Fiera Capital has seen EPS rising for the last five years, at 42% per annum. Strong earnings is nice to see, but unless this can be sustained on minimal reinvestment of profits, we would question whether dividends will follow suit.

Our Thoughts On Fiera Capital's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 5 warning signs for Fiera Capital (1 is significant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.