When the market is stuffed with uncertainty, it helps to have at the least one reliable funding you should purchase, tuck away, and neglect about for some time. Timbercreek Monetary (TSX:TF) is a type of names which may not get the flashiest headlines, nevertheless it’s constructed to reward affected person buyers. With a give attention to lending to income-producing actual property, a hefty dividend, and a disciplined method to danger, it’s the type of inventory that might quietly energy long-term portfolios. Particularly now, with shares down about 13% from 52-week highs, it appears undervalued.
The inventory
Timbercreek shouldn’t be your typical large financial institution or insurer. It operates as a non-bank lender, providing short-term structured financing primarily to business actual property homeowners. These loans are secured by high-quality properties in Canada’s main city centres, locations the place the demand for flats, workplace house, and mixed-use buildings stays sturdy even throughout financial downturns. That’s vital as a result of whereas property values may fluctuate within the brief time period, the necessity for house in cities like Toronto, Vancouver, and Montreal is long-term and structural.
What units Timbercreek aside is the way it manages its mortgage ebook. As of the primary quarter of 2025, 88.3% of its mortgage portfolio consisted of first-position mortgages, which means Timbercreek will get paid first in case of default. The typical loan-to-value ratio on these loans is 66.2%, which supplies a powerful cushion in case property values decline. In different phrases, it performs it secure.
The numbers
From a monetary perspective, the corporate is holding up nicely. In Q1 2025, Timbercreek reported web funding revenue of $28.6 million, up from $24.6 million a yr in the past. Web revenue got here in at $14.8 million, or $0.18 per share. Distributable revenue, which is what pays the dividend, hit $15.4 million, or $0.19 per share. That resulted in a payout ratio of 92.8%, a manageable degree for an actual property lender with regular money flows. That additionally meant buyers continued to gather a gradual month-to-month dividend of $0.0575, translating to an annual yield of about 9.5% at present costs.
The corporate hasn’t simply held the road on dividends, it’s proven it will probably generate development whereas sustaining high quality. Its web mortgage funding portfolio totalled $1.1 billion on the finish of March 2025, and 84.8% of these loans are on variable rates of interest with price flooring. Which means the corporate can profit when charges rise, with out taking up an excessive amount of draw back danger if charges fall. With the Financial institution of Canada signalling a maintain on additional price hikes for now, Timbercreek’s portfolio appears well-positioned to proceed producing constant curiosity revenue.
The concerns
After all, Timbercreek does carry leverage. Its debt-to-equity ratio is 1.6, which is larger than some may like. However in contrast to many leveraged corporations, Timbercreek backs its borrowing with secured mortgage belongings, giving it a a lot stronger basis. Its excessive curiosity protection ratio and dependable curiosity revenue additional assist handle this danger. This isn’t a speculative high-yield play, it’s a enterprise that is aware of find out how to handle its liabilities.
One of many extra underappreciated elements of Timbercreek is the standard of its administration. The workforce has constantly prevented speculative loans and stayed centered on conservative underwriting, even when looser lending might need delivered quicker development. The truth is, a part of why the share value is down could also be as a result of Timbercreek merely isn’t chasing dangerous offers in a harder market. That type of self-discipline might look boring now, however over a 5- to 10-year horizon, it tends to win out.
Backside line
Timbercreek received’t double in a yr. That’s not the purpose. It’s a inventory to personal for what it provides again each month in revenue, even when markets wobble. A yield close to 10%, backed by high-quality belongings and regular money movement, is uncommon. And proper now, you’re not simply getting revenue, you’re shopping for in at a reduction.
