Timbercreek Financial (TSE:TF) Has Announced A Dividend Of CA$0.0575

The board of Timbercreek Financial Corp. (TSE:TF) has announced that it will pay a dividend on the 15th of February, with investors receiving CA$0.0575 per share. Based on this payment, the dividend yield on the company's stock will be 9.5%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Timbercreek Financial

Timbercreek Financial Is Paying Out More Than It Is Earning

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last payment made up 87% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Over the next year, EPS is forecast to fall by 11.8%. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 101%, which could put the dividend under pressure if earnings don't start to improve.

Timbercreek Financial Is Still Building Its Track Record

It is great to see that Timbercreek Financial has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of CA$0.684 in 2016 to the most recent total annual payment of CA$0.69. Its dividends have grown at less than 1% per annum over this time frame. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

Timbercreek Financial May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Timbercreek Financial has only grown its earnings per share at 4.1% per annum over the past five years. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. 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. Just as an example, we've come across 3 warning signs for Timbercreek Financial you should be aware of, and 2 of them shouldn't be ignored. 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.