Dividend Investors: Don't Be Too Quick To Buy Firm Capital Mortgage Investment Corporation (TSE:FC) For Its Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Firm Capital Mortgage Investment Corporation (TSE:FC) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 27th of February to receive the dividend, which will be paid on the 16th of March.
Firm Capital Mortgage Investment's next dividend payment will be CA$0.078 per share. Last year, in total, the company distributed CA$0.99 to shareholders. Looking at the last 12 months of distributions, Firm Capital Mortgage Investment has a trailing yield of approximately 6.7% on its current stock price of CA$15.11. If you buy this business for its dividend, you should have an idea of whether Firm Capital Mortgage Investment's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out our latest analysis for Firm Capital Mortgage Investment
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year Firm Capital Mortgage Investment paid out 93% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings.
When a company pays out a dividend that is not well covered by profits, the dividend is generally seen as more vulnerable to being cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that Firm Capital Mortgage Investment's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
Firm Capital Mortgage Investment also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Firm Capital Mortgage Investment's dividend payments per share have declined at 0.9% per year on average over the past ten years, which is uninspiring.
To Sum It Up
From a dividend perspective, should investors buy or avoid Firm Capital Mortgage Investment? Firm Capital Mortgage Investment's earnings have barely moved in recent times, and the company is paying out a disagreeably high percentage of its earnings; a mediocre combination. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.
Wondering what the future holds for Firm Capital Mortgage Investment? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
