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

Firm Capital Mortgage Investment Corporation (TSE:FC) will pay a dividend of CA$0.078 on the 15th of August. This means the annual payment is 8.9% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Firm Capital Mortgage Investment

Firm Capital Mortgage Investment Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Firm Capital Mortgage Investment's profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Looking forward, EPS could fall by 0.02% if the company can't turn things around from the last few years. 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

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was CA$0.99 in 2013, and the most recent fiscal year payment was CA$0.95. The dividend has shrunk at a rate of less than 1% a year over this period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

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

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 Firm Capital Mortgage Investment that investors need to be conscious of moving forward. Is Firm Capital Mortgage Investment not quite the opportunity you were looking for? Why not check out our selection of top 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.