The board of Firm Capital Mortgage Investment Corporation (TSE:FC) has announced that it will pay a dividend of CA$0.078 per share on the 15th of November. Based on this payment, the dividend yield on the company's stock will be 8.3%, which is an attractive boost to shareholder returns.
View our latest analysis for Firm Capital Mortgage Investment
Firm Capital Mortgage Investment Will Pay Out More Than It Is Earning
If the payments aren't sustainable, a high yield for a few years won't matter that much.
Firm Capital Mortgage Investment has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. While having a long history of dividends is a good sign, Firm Capital Mortgage Investment's latest earning reports show that its payout ratio - the ratio of the dividend amount to earnings - currently sits at 99%. This figure could be worrying with regards to the sustainability of the company's dividends, as earnings just barely cover its dividend payments.
If the company can't turn things around, EPS could fall by 2.4% over the next year. If the dividend continues along recent trends, we estimate the future payout ratio could reach 107%, which could put the dividend in jeopardy if the company's earnings don't improve.
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was CA$0.99 in 2012, and the most recent fiscal year payment was CA$0.948. Payments have been decreasing at a very slow pace in this time period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
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. In the last five years, Firm Capital Mortgage Investment's earnings per share has shrunk at approximately 2.4% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.
Firm Capital Mortgage Investment's Dividend Doesn't Look Great
Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. The dividend doesn't inspire confidence that it will provide solid income in the future.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Firm Capital Mortgage Investment 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.
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