Timbercreek Financial Corp.’s (TSE:TF) investors are due to receive a payment of CA$0.0575 per share on 15th of March. The dividend yield will be 9.5% based on this payment which is still above the industry average.
Check out 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. This leaves plenty of cash for reinvestment into the business.
Over the next year, EPS is forecast to fall by 11.9%. 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 Doesn’t Have A Long Payment History
Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2016, the dividend has gone from CA$0.684 total annually to 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 have grown at around 4.1% a year for the past five years, which isn’t massive but still better than seeing them shrink. Timbercreek Financial’s earnings per share has barely grown, which is not ideal – perhaps this is why the company pays out the majority of its earnings to shareholders. That’s fine as far as it goes, but we’re less enthusiastic as this often signals that the dividend is likely to grow slower in the future.
Our Thoughts On Timbercreek Financial’s Dividend
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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Timbercreek Financial has 3 warning signs (and 2 which are potentially serious) we think you should know about. Is Timbercreek Financial not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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