The board of Timbercreek Financial Corp. (TSE:TF) has announced that it will pay a dividend on the 15th of February, with investors receiving CA$0.0575 per share. The dividend yield will be 9.5% based on this payment which is still above the industry average.
See our latest analysis for Timbercreek Financial
Timbercreek Financial Is Paying Out More Than It Is Earning
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Timbercreek Financial’s dividend made up quite a large proportion of earnings but only 60% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.
Looking forward, earnings per share is forecast to fall by 11.8% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 101%, which is definitely a bit high to be sustainable going forward.
Timbercreek Financial Is Still Building Its Track Record
The dividend’s track record has been pretty solid, but with only 8 years of history we want to see a few more years of history before making any solid conclusions. Since 2016, the annual payment back then was CA$0.684, compared to the most recent full-year payment of CA$0.69. Its dividends have grown at less than 1% per annum over this time frame. It’s good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn’t want to depend on this dividend too heavily.
Dividend Growth May Be Hard To Achieve
Some investors will be chomping at the bit to buy some of the company’s stock based on its dividend history. Earnings has been rising at 4.1% per annum over the last five years, which admittedly is a bit slow. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company’s dividend prospects.
In Summary
Overall, we don’t think this company makes a great dividend stock, even though the dividend wasn’t cut this year. 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. We would probably look elsewhere for an income investment.
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. Just as an example, we’ve come across 3 warning signs for Timbercreek Financial you should be aware of, and 2 of them are concerning. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
