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Do These 3 Checks Before Buying Timbercreek Financial Corporation (TSE:TF) For Its Upcoming Dividend

Simply Wall St

Timbercreek Financial Corporation (TSE:TF) stock is about to trade ex-dividend in 4 days time. Ex-dividend means that investors that purchase the stock on or after the 29th of August will not receive this dividend, which will be paid on the 13th of September.

Timbercreek Financial's next dividend payment will be CA$0.058 per share, and in the last 12 months, the company paid a total of CA$0.69 per share. Calculating the last year's worth of payments shows that Timbercreek Financial has a trailing yield of 7.2% on the current share price of CA$9.55. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Timbercreek Financial has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Timbercreek Financial

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Last year Timbercreek Financial paid out 101% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings.

When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

TSX:TF Historical Dividend Yield, August 24th 2019

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that Timbercreek Financial's earnings are effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Timbercreek Financial's dividend payments are effectively flat on where they were three years ago.

Final Takeaway

Is Timbercreek Financial an attractive dividend stock, or better left on the shelf? While we're glad to see that its earnings aren't shrinking, we're not enamored of the fact that it's paying out 101% of last year's earnings. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

Wondering what the future holds for Timbercreek Financial? See what the three 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.

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.

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. Thank you for reading.