Timbercreek Financial (TSE:TF) Has Re-Affirmed Its Dividend Of CA$0.058

The board of Timbercreek Financial Corp. (TSE:TF) has announced that it will pay a dividend of CA$0.058 per share on the 15th of June. Based on this payment, the dividend yield on the company's stock will be 7.7%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Timbercreek Financial

Timbercreek Financial Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 144% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 73%. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

Earnings per share is forecast to rise by 44.8% over the next year. However, if the dividend continues growing along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 101% over the next year.

Timbercreek Financial Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 6 years of history we want to see a few more years of history before making any solid conclusions. Since 2016, the dividend has gone from CA$0.68 to CA$0.69. Its dividends have grown at less than 1% per annum over this time frame. 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.

Dividend Growth Is Doubtful

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Timbercreek Financial has seen earnings per share falling at 9.9% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

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. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Timbercreek Financial that investors should take into consideration. 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.