Timbercreek Financial (TSE:TF) Has Announced A Dividend Of CA$0.0575

Timbercreek Financial Corp. (TSE:TF) will pay a dividend of CA$0.0575 on the 15th of August. Based on this payment, the dividend yield on the company's stock will be 8.3%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Timbercreek Financial

Timbercreek Financial 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.

Timbercreek Financial has established itself as a dividend paying company, given its 6-year history of distributing earnings to shareholders. Past distributions unfortunately do not guarantee future ones, and Timbercreek Financial's last earnings report actually showed that the company went over its net earnings in its total dividend distribution. This is worrying for investors of Timbercreek Financial, as it points towards the dividends being unsustainable in the long term.

Earnings per share is forecast to rise by 17.0% over the next year. Assuming the dividend continues along recent trends, we think the future payout ratio could reach 126%, which probably can't continue putting some pressure on the balance sheet.

Timbercreek Financial Doesn't Have A Long Payment History

It is great to see that Timbercreek Financial has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2016, the dividend has gone from CA$0.684 total annually to CA$0.69. Dividend payments have grown at less than 1% a year over this period. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

Dividend Growth May Be Hard To Come By

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. It's not great to see that Timbercreek Financial's earnings per share has fallen at approximately 9.9% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

We're Not Big Fans Of Timbercreek Financial's Dividend

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Timbercreek Financial make more consistent payments in the future. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

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. As an example, we've identified 2 warning signs for Timbercreek Financial that you should be aware of before investing. Is Timbercreek Financial not quite the opportunity you were looking for? Why not check out our selection of top 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.