Firm Capital Mortgage Investment (TSE:FC) Has Announced A Dividend Of CA$0.078

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Simply Wall St

Sat, Jan 1, 2022, 4:59 AM 3 min read

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, the dividend made up 79% of cash flows, but a higher proportion of net income. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.

If the company can't turn things around, EPS could fall by 2.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 108%, which could put the dividend in jeopardy if the company's earnings don't improve.

historic-dividend — TSX:FC Historic Dividend January 1st 2022

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the first annual payment was CA$1.01, compared to the most recent full-year payment of CA$0.95. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. A company that decreases its dividend over time generally isn't what we are looking for.

Firm Capital Mortgage Investment May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Over the past five years, it looks as though Firm Capital Mortgage Investment's EPS has declined at around 2.1% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments are bit high to be considered sustainable, and the track record isn't the best. We don't think Firm Capital Mortgage Investment is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 3 warning signs for Firm Capital Mortgage Investment that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.

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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.