Firm Capital Mortgage Investment's (TSE:FC) Dividend Will Be 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 17th of October. This means the annual payment is 7.7% of the current stock price, which is above the average for the industry.

View our latest analysis for Firm Capital Mortgage Investment

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.

Firm Capital Mortgage Investment has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. While there are no guarantees that Firm Capital Mortgage Investment will always be able to pay out a dividend, the company's payout ratio sits at 99%. This may be worrying, as it shows that Firm Capital Mortgage Investment is barely covering its dividend.

EPS is set to fall by 2.4% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 107%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the annual payment back then was CA$0.99, compared to the most recent full-year payment of 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.

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

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. In the last five years, Firm Capital Mortgage Investment's earnings per share has shrunk at approximately 2.4% per annum. 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

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. We don't think that this is a great candidate to be an income stock.

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. Taking the debate a bit further, we've identified 2 warning signs for Firm Capital Mortgage Investment that investors need to be conscious of moving forward. 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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