Terra Firma Capital (CVE:TII) Is Due To Pay A Dividend Of CA$0.06

The board of Terra Firma Capital Corporation (CVE:TII) has announced that it will pay a dividend of CA$0.06 per share on the 14th of January. This means that the annual payment will be 3.5% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Terra Firma Capital

Terra Firma Capital's Earnings Easily Cover the Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, Terra Firma Capital's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 5.7% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 39%, which is in the range that makes us comfortable with the sustainability of the dividend.

Terra Firma Capital Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. The first annual payment during the last 2 years was US$0.14 in 2019, and the most recent fiscal year payment was US$0.16. This works out to be a compound annual growth rate (CAGR) of approximately 4.3% a year over that time. Terra Firma Capital hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

Terra Firma Capital Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see Terra Firma Capital has been growing its earnings per share at 5.7% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Terra Firma Capital's Dividend

Overall, we think Terra Firma Capital is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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. Taking the debate a bit further, we've identified 2 warning signs for Terra Firma Capital that investors need to be conscious of moving forward. We have also put together a list of global stocks with a solid dividend.

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.

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