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 positively getting some consideration. In a world the place assured returns are modest and market uncertainty is all over the 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 information. 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 revenue, that’s onerous to disregard. However dividend investing isn’t nearly chasing excessive yields. It’s about discovering reliable revenue. 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 this point, 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 web earnings attributable to shareholders dropped to only $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 change revaluation losses weighing on earnings. The consequence? A payout ratio, primarily based on web revenue, that sits uncomfortably excessive at 374%. Which means 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 value digging just a little deeper. Dividend protection isn’t nearly reported web revenue. What issues simply as a lot, if no more, is whether or not an organization’s money circulate can help its dividend. And right here’s the place Fiera inventory has a bit extra going for it. The money payout ratio is considerably extra affordable. So, whereas on paper it seems unsustainable, in apply it’s being coated by the money the corporate is producing, a minimum of for now.
There are some shiny spots too. Fiera’s belongings beneath administration grew from $161.7 billion to $167.1 billion by the tip of 2024. That’s an honest bump, particularly contemplating market volatility. A lot of the improve got here from market impacts and beneficial change charges, although web natural progress in public markets was adverse. The agency can be increasing its footprint globally and has a mixture of institutional and retail purchasers, which helps unfold out threat.
Nonetheless, there’s no getting round the truth that the enterprise is beneath strain. Efficiency charges are an vital driver of earnings, and people can swing primarily based on markets and fund outcomes. Prices are rising, and the asset administration house is extra aggressive than ever. That’s why some buyers may have a look at the yield and marvel if it’s extra of a warning signal than a possibility.
Backside line
Now in the event you’re the sort of investor who can deal with some short-term chop for the potential for sturdy revenue, Fiera inventory may nonetheless have a spot in your portfolio. It’s not the sort of dividend inventory you purchase and neglect about. It’s one you regulate. Monitor these earnings studies. Watch what administration is saying about capital allocation and profitability. If you happen to see indicators that earnings are recovering or prices are coming beneath management, that huge dividend may begin to look much more comfy.
Within the meantime, the yield alone may assist pad returns whereas the inventory finds its footing. Simply bear in mind, huge yields typically include strings hooked up. The danger is increased, 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 revenue from a rock-solid firm with no surprises, in all probability not. However in the event you’re okay with some threat and wish to gather huge cheques whilst you anticipate a turnaround, it may be value a re-evaluation. Simply don’t put all of your eggs, or your retirement, into this one basket.
