Firm Capital Mortgage Investment (TSE:FC) Has Announced A Dividend Of CA$0.078

The board of Firm Capital Mortgage Investment Corporation (TSE:FC) has announced that it will pay a dividend of CA$0.078 per share on the 15th of September. This makes the dividend yield 8.7%, which will augment investor returns quite nicely.

Check out our latest analysis for Firm Capital Mortgage Investment

Firm Capital Mortgage Investment Is Paying Out More Than It Is Earning

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Firm Capital Mortgage Investment's profits didn't cover the dividend, but the company was generating enough cash instead. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

EPS is set to grow by 0.09% over the next year if recent trends continue. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 98% over the next year.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of CA$1.07 in 2013 to the most recent total annual payment of CA$0.95. Doing the maths, this is a decline of about 1.2% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Firm Capital Mortgage Investment May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Firm Capital Mortgage Investment hasn't seen much change in its earnings per share over the last five years. The company is paying out a lot of its profits, even though it is growing those profits pretty slowly. As they say in finance, 'past performance is not indicative of future performance', but we are not confident a company with limited earnings growth and a high payout ratio will be a star dividend-payer over the next decade.

Our Thoughts On Firm Capital Mortgage Investment's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Firm Capital Mortgage Investment's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

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. Taking the debate a bit further, we've identified 2 warning signs for Firm Capital Mortgage Investment that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.