Firm Capital Mortgage Investment (TSE:FC) Is Due To Pay A Dividend Of CA$0.078

Firm Capital Mortgage Investment Corporation (TSE:FC) will pay a dividend of CA$0.078 on the 15th of December. The dividend yield will be 8.1% based on this payment which is still above the industry average.

Our analysis indicates that FC is potentially undervalued!

Firm Capital Mortgage Investment Not Expected To Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it 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. 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 may be worrying, as it shows that Firm Capital Mortgage Investment is barely covering its dividend.

Looking forward, EPS could fall by 2.4% if the company can't turn things around from the last few years. The future payout ratio is also estimated by analysts to be at 101% in 3 years, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the annual payment back then was CA$0.99, compared to the most recent full-year payment of 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.

Firm Capital Mortgage Investment May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Firm Capital Mortgage Investment's EPS has declined at around 2.4% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

Firm Capital Mortgage Investment's Dividend Doesn't Look Great

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. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

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 identified 2 warning signs for Firm Capital Mortgage Investment (1 is concerning!) that you should be aware of before investing. Is Firm Capital Mortgage Investment not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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.