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

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. This makes the dividend yield 8.3%, which will augment investor returns quite nicely.

See our latest analysis for Firm Capital Mortgage Investment

Firm Capital Mortgage Investment Will Pay Out More Than It Is Earning

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Having distributed dividends for at least 10 years, Firm Capital Mortgage Investment has a long history of paying out a part of its 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 is a sign that Firm Capital Mortgage Investment is barely covering its dividend.

If the company can't turn things around, EPS could fall by 2.4% over the next year. Assuming the dividend continues along recent trends, we believe the future payout ratio could reach 107%, 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. Since 2012, the dividend has gone from CA$0.99 total annually to CA$0.948. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Firm Capital Mortgage Investment has seen earnings per share falling at 2.4% 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're Not Big Fans Of Firm Capital Mortgage Investment's Dividend

In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. 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. The dividend doesn't inspire confidence that it will provide solid income in the future.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Firm Capital Mortgage Investment that investors should know about before committing capital to this stock. 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.