Firm Capital Mortgage Investment (TSE:FC) Will Pay 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 September. The dividend yield will be 7.7% based on this payment which is still above the industry average.

See our latest analysis for Firm Capital Mortgage Investment

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

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

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 is a sign 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

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2012, the dividend has gone from CA$0.99 total annually to CA$0.948. The dividend has shrunk at a rate of less than 1% a year over this 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. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

An additional note is that the company has been raising capital by issuing stock equal to 11% of shares outstanding in the last 12 months. 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 seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, this doesn't get us very excited from an income standpoint.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Firm Capital Mortgage Investment that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.