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Timbercreek Financial Corp.'s (TSE:TF) investors are due to receive a payment of CA$0.058 per share on 15th of February. The dividend yield will be 7.2% based on this payment which is still above the industry average.
View our latest analysis for Timbercreek Financial
Timbercreek Financial Is Paying Out More Than It Is Earning
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Timbercreek Financial's profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.
Earnings per share is forecast to rise by 49.3% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 101%, which is a bit high and could start applying pressure to the balance sheet.
Timbercreek Financial Doesn't Have A Long Payment History
The dividend's track record has been pretty solid, but with only 6 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from CA$0.68 in 2016 to the most recent annual payment of CA$0.69. Its dividends have grown at less than 1% per annum over this time frame. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.
The Dividend Has Limited Growth Potential
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Timbercreek Financial's EPS has fallen by approximately 11% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.
Timbercreek Financial's Dividend Doesn't Look Sustainable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.