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 13th of January. This means that the annual payment will be 4.7% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Terra Firma Capital

Terra Firma Capital's Payment Expected To Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Terra Firma Capital has a short history of paying out dividends, with its current track record at only 3 years. Taking data from Terra Firma Capital's last earnings report, the payout ratio is at a decent 37%, meaning that the company is able to pay out its dividend with some room to spare.

If the trend of the last few years continues, EPS will grow by 32.7% over the next 12 months. If the dividend continues along recent trends, we estimate the future payout ratio will be 38%, which is in the range that makes us comfortable with the sustainability of the dividend.

Terra Firma Capital Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. The dividend has gone from an annual total of $0.143 in 2019 to the most recent total annual payment of $0.174. This means that it has been growing its distributions at 6.7% per annum over that time. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.

The Dividend Looks Likely To Grow

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 that Terra Firma Capital has been growing its earnings per share at 33% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Terra Firma Capital Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Terra Firma Capital you should be aware of, and 1 of them shouldn't be ignored. 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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