Fiera Capital (TSX: FSZ) is a reputation that doesn’t at all times pop to the highest of most dividend investor lists, however with a double-digit yield, it’s undoubtedly getting some consideration. In a world the place assured returns are modest and market uncertainty is in every single place, a dividend yield over 13% tends to show heads. The true query is: can it final? And extra importantly, is now the appropriate time to scoop it up?
The numbers
Let’s begin with the info. As of writing, Fiera inventory trades round $6.50 and pays a quarterly dividend of $0.216 per share. That provides as much as an annual payout of $0.864, which places the present yield at a juicy 13.3% at writing. For buyers centered on producing earnings, that’s onerous to disregard. However dividend investing isn’t nearly chasing excessive yields. It’s about discovering reliable earnings. And with Fiera inventory, it’s a little bit of a combined bag.
In its newest earnings launch for the complete yr 2024, Fiera reported income of $688.6 million, simply barely forward of the $686.6 million it introduced within the earlier yr. To date, so regular. However that’s the place the consolation ends. Adjusted earnings earlier than curiosity, taxes, depreciation and amortization (EBITDA) fell to $195.8 million from $205.9 million in 2023, and internet earnings attributable to shareholders dropped to simply $25 million. That’s lower than half of the $58.5 million it earned within the prior yr.
Efficiency charges took a success, significantly from the EMEA area, and better admin prices didn’t assist both. There have been additionally some international alternate revaluation losses weighing on earnings. The consequence? A payout ratio, based mostly on internet earnings, that sits uncomfortably excessive at 374%. Meaning the corporate is paying out much more in dividends than it truly earns in earnings.
Concerns
Now, earlier than hitting the panic button, it’s price digging slightly deeper. Dividend protection isn’t nearly reported internet earnings. What issues simply as a lot, if no more, is whether or not an organization’s money circulate can assist its dividend. And right here’s the place Fiera inventory has a bit extra going for it. The money payout ratio is considerably extra cheap. So, whereas on paper it appears unsustainable, in apply it’s being lined by the money the corporate is producing, not less than for now.
There are some vibrant spots too. Fiera’s property underneath administration grew from $161.7 billion to $167.1 billion by the tip of 2024. That’s a good bump, particularly contemplating market volatility. A lot of the improve got here from market impacts and beneficial alternate charges, despite the fact that internet natural development in public markets was damaging. The agency can be increasing its footprint globally and has a mixture of institutional and retail purchasers, which helps unfold out danger.
Nonetheless, there’s no getting round the truth that the enterprise is underneath strain. Efficiency charges are an necessary driver of earnings, and people can swing based mostly on markets and fund outcomes. Prices are rising, and the asset administration house is extra aggressive than ever. That’s why some buyers would possibly take a look at the yield and marvel if it’s extra of a warning signal than a chance.
Backside line
Now when you’re the sort of investor who can deal with some short-term chop for the potential for sturdy earnings, Fiera inventory would possibly nonetheless have a spot in your portfolio. It’s not the sort of dividend inventory you purchase and overlook about. It’s one you control. Monitor these earnings reviews. Watch what administration is saying about capital allocation and profitability. If you happen to see indicators that earnings are recovering or prices are coming underneath management, that massive dividend would possibly begin to look much more comfy.
Within the meantime, the yield alone may assist pad returns whereas the inventory finds its footing. Simply keep in mind, massive yields usually include strings connected. The danger is greater, and there’s at all times the potential for a dividend reduce if issues go sideways.
So, is Fiera inventory a purchase for its dividend? If you happen to’re searching for dependable earnings from a rock-solid firm with no surprises, most likely not. However when you’re okay with some danger and wish to gather massive cheques whilst you await a turnaround, it is likely to be price a re-evaluation. Simply don’t put all of your eggs, or your retirement, into this one basket.
