Fiera Capital Corporation (TSE:FSZ) has announced that it will pay a dividend of CA$0.21 per share on the 21st of December. This makes the dividend yield 7.4%, which will augment investor returns quite nicely.
See our latest analysis for Fiera Capital
Fiera Capital Doesn't Earn Enough To Cover Its Payments
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Fiera Capital's dividend was higher than its profits, but the free cash flows quite comfortably covered it. 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.
Over the next year, EPS is forecast to expand by 84.9%. However, if the dividend continues growing along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 140% over the next year.
Fiera Capital Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2011, the first annual payment was CA$0.32, compared to the most recent full-year payment of CA$0.86. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.
Fiera Capital May Find It Hard To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. However, Fiera Capital's EPS was effectively flat over the past five years, which could stop the company from paying more every year. Paying more than double what it is paying out, and not showing a track record of being able to grow earnings, we can only see dividend cuts in the future.
Our Thoughts On Fiera Capital's Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Fiera Capital's payments, as there could be some issues with sustaining them into the future. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 4 warning signs for Fiera Capital (1 can't be ignored!) that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.
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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.
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About TSX:FSZ
Solid track record established dividend payer.
