Terra Firma Capital's (CVE:TII) Dividend Will Be $0.06

Terra Firma Capital Corporation (CVE:TII) will pay a dividend of $0.06 on the 14th of October. This means that the annual payment will be 4.8% 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 Payment Expected To Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Terra Firma Capital is just starting to establish itself as being able to pay dividends to shareholders, given its short 3-year history of distributing earnings. Diving into the company's earnings report, the payout ratio is set at 36%, which is a decent ratio of dividend payout to earnings, and may sustain future dividends if the company stays at its current trend.

Looking forward, earnings per share could rise by 21.0% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the future payout ratio could be 40% by next year, which is in a pretty sustainable range.

Terra Firma Capital Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The dividend has gone from an annual total of $0.143 in 2019 to the most recent total annual payment of $0.179. This means that it has been growing its distributions at 7.7% per annum over that time. Terra Firma Capital has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

The Dividend Looks Likely To Grow

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 21% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Terra Firma Capital Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Terra Firma Capital might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Terra Firma Capital has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about. Is Terra Firma Capital not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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