Timbercreek Financial (TSE:TF) Is Due To Pay A Dividend Of CA$0.0575

Timbercreek Financial Corp. (TSE:TF) has announced that it will pay a dividend of CA$0.0575 per share on the 14th of June. Based on this payment, the dividend yield on the company's stock will be 9.7%, which is an attractive boost to shareholder returns.

See our latest analysis for Timbercreek Financial

Timbercreek Financial Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Timbercreek Financial's dividend made up quite a large proportion of earnings but only 71% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to fall by 3.8% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 105%, which is definitely a bit high to be sustainable going forward.

Timbercreek Financial Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 8 years of history we want to see a few more years of history before making any solid conclusions. 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. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Earnings has been rising at 2.2% per annum over the last five years, which admittedly is a bit slow. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company's dividend prospects.

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. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Timbercreek Financial (of which 2 don't sit too well with us!) you should know about. Is Timbercreek Financial 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.