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

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 August. Based on this payment, the dividend yield on the company's stock will be 8.2%, 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

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Firm Capital Mortgage Investment has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Although the company has a long history in paying out dividends, Firm Capital Mortgage Investment's latest earnings report shows a payout ratio of 99%. This may be worrying, as it shows that Firm Capital Mortgage Investment is barely covering its dividend.

EPS is set to fall by 3.1% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the future payout ratio could reach 110%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut 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. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Firm Capital Mortgage Investment has seen earnings per share falling at 3.1% per year over the last five years. 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.

We should note that Firm Capital Mortgage Investment has issued stock equal to 12% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

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's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, this doesn't get us very excited from an income standpoint.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. 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.

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.