Terra Firma Capital (CVE:TII) Has Re-Affirmed Its Dividend Of CA$0.06

Terra Firma Capital Corporation's (CVE:TII) investors are due to receive a payment of CA$0.06 per share on 14th of January. This means the dividend yield will be fairly typical at 3.7%.

View our latest analysis for Terra Firma Capital

Terra Firma Capital's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Terra Firma Capital's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share could rise by 5.7% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 39% by next year, which is in a pretty sustainable range.

Terra Firma Capital Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2018, the dividend has gone from US$0.14 to US$0.19. This means that it has been growing its distributions at 9.4% per annum over that time. Terra Firma Capital has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

We Could See Terra Firma Capital's Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Terra Firma Capital has impressed us by growing EPS at 5.7% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Terra Firma Capital's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Terra Firma Capital's payments, as there could be some issues with sustaining them into the future. While Terra Firma Capital is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

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 Terra Firma Capital 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 performing dividend stock.

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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.