Firm Capital Mortgage Investment (TSE:FC) Is Due To Pay A Dividend Of CA$0.078

Firm Capital Mortgage Investment Corporation's (TSE:FC) investors are due to receive a payment of CA$0.078 per share on 15th of August. Based on this payment, the dividend yield on the company's stock will be 9.3%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Firm Capital Mortgage Investment

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

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 98% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 58%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

EPS is set to fall by 0.02% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 99%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2013, the annual payment back then was CA$0.99, compared to the most recent full-year payment of CA$0.95. The dividend has shrunk at a rate of less than 1% a year over this period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. However, Firm Capital Mortgage Investment's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Firm Capital Mortgage Investment's Dividend Doesn't Look Sustainable

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. We don't think Firm Capital Mortgage Investment is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Firm Capital Mortgage Investment that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.