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 on the 15th of July, with investors receiving CA$0.058 per share. The dividend yield will be 8.4% based on this payment which is still above the industry average.

See our latest analysis for Timbercreek Financial

Timbercreek Financial Is Paying Out More Than It Is Earning

A big dividend yield for a few years doesn't mean much if it 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. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Earnings per share is forecast to rise by 44.8% over the next year. 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 Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The dividend has gone from CA$0.68 in 2016 to the most recent annual payment of 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 May Be Hard To Come By

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. 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. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

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. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Timbercreek Financial 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.