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Attention dividend hunters! Firm Capital Mortgage Investment Corporation (TSE:FC) will be distributing its dividend of CA$0.12 per share on the 15 March 2019, and will start trading ex-dividend in 2 days time on the 27 February 2019. Should you diversify into Firm Capital Mortgage Investment and boost your portfolio income stream? Well, keep on reading because today, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.
5 checks you should do on a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is it the top 25% annual dividend yield payer?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share amount increased over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Firm Capital Mortgage Investment pass our checks?
The company currently pays out 95% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is not sufficiently covered by its earnings. In the near future, analysts are predicting a payout ratio of 101%, which, assuming the share price stays the same, leads to a dividend yield of 7.7%.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Not only have dividend payouts from Firm Capital Mortgage Investment fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. These characteristics do not bode well for income investors seeking reliable stream of dividends.
Relative to peers, Firm Capital Mortgage Investment has a yield of 7.5%, which is high for Mortgage stocks.
After digging a little deeper into Firm Capital Mortgage Investment’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three important aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for FC’s future growth? Take a look at our free research report of analyst consensus for FC’s outlook.
- Valuation: What is FC worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether FC is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
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 firstname.lastname@example.org. 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.