Timbercreek Financial (TSE:TF) Has Announced A Dividend Of CA$0.058

Timbercreek Financial Corp. (TSE:TF) has announced that it will pay a dividend of CA$0.058 per share on the 15th of December. This means the annual payment is 7.3% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Timbercreek Financial

Timbercreek Financial Is Paying Out More Than It Is Earning

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Timbercreek Financial's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Over the next year, EPS is forecast to expand by 48.9%. If the dividend continues on its recent course, the payout ratio in 12 months could be 101%, which is a bit high and could start applying pressure to the balance sheet.

Timbercreek Financial Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 5 years of history we want to see a few more years of history before making any solid conclusions. Since 2016, the first annual payment was CA$0.68, compared to the most recent full-year payment of CA$0.69. Dividend payments have grown at less than 1% a year over this period. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Timbercreek Financial's earnings per share has shrunk at 11% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Timbercreek Financial has 2 warning signs (and 1 which can't be ignored) we think you should know about. We have also put together a list of global stocks with a solid dividend.

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.

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