Timbercreek Financial's (TSE:TF) Dividend Will Be CA$0.0575

Timbercreek Financial Corp.'s (TSE:TF) investors are due to receive a payment of CA$0.0575 per share on 15th of November. Based on this payment, the dividend yield on the company's stock will be 9.2%, which is an attractive boost to shareholder returns.

Our analysis indicates that TF is potentially overvalued!

Timbercreek Financial Not Expected To Earn Enough To Cover Its Payments

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Having paid out dividends for 6 years, Timbercreek Financial has a good history of paying out a part of its 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.

Over the next year, EPS is forecast to expand by 19.1%. If the dividend continues on its recent course, the future payout ratio in 12 months could be 120%, 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 annual payment during the last 6 years was CA$0.684 in 2016, and the most recent fiscal year payment was CA$0.69. Its dividends have grown at less than 1% per annum over this time frame. Timbercreek Financial hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

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. Unfortunately things aren't as good as they seem. Timbercreek Financial has seen earnings per share falling at 7.2% per year over the last five years. 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. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

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

Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. The dividend doesn't inspire confidence that it will provide solid income in the future.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Timbercreek Financial that investors should know about before committing capital to this stock. 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.