ACT NOW: Double Your Money With Canada’s Best Dividend Stock

Firm Capital Mortgage Investment Corporation (TSX:FC) is focused on providing shareholders with stable and secure cash dividends from the company’s investment portfolio.

| More on:
edit Person using calculator next to charts and graphs

Image source: Getty Images.

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Firm Capital Mortgage Investment (TSX:FC) is a non-bank lender which invests predominantly in short-term residential and commercial real estate mortgage loans and real estate-related debt investments. The company operates as a mortgage investment corporation and has no income tax payable provided that some requirements are met.

Inexpensive valuation

The company has a price-to-earnings ratio of 15.97, price-to-book ratio of 1.25, dividend yield of 6.80%, and market capitalization of $428 million. Debt is very sparingly used at Firm Capital, as evidenced by a debt-to-equity ratio of just 0.56. The company has excellent performance metrics with an operating margin of 81.39% and a return on equity of 8.15%.

The company’s primary investment objective is the preservation of shareholders’ equity, while providing shareholders with a stable stream of dividends from Firm Capital’s investments. The company achieves investment objectives by pursuing a strategy of investing in loans in certain real estate markets that are underserviced by larger financial institutions.

Diverse portfolio

The company holds an investment portfolio that is widely diversified across many investments and is concentrated in first mortgages. Firm Capital participates in various loan syndicates and reduces exposure to risk. The portfolio is primarily short term in nature. The company’s mortgage banker acts as Firm Capital’s loan originator, underwriter, servicer, and syndicator. Other corporate affairs are administered by a treasury management division of the company.

Steady income

The company strives to preserve shareholders’ equity and provide a return in excess of 400 basis points above the average yield to maturity on one-year Government of Canada treasury bills. Management is focused on providing shareholders with stable and secure cash dividends from the company’s investment portfolio.

Robust investment process

The company’s mortgage banker reviews and selects investment opportunities  which are then approved by an investment committee. The company has strict investment and operating guidelines which the mortgage banker adheres to. The company also has a credit manager, who is responsible for overseeing investment approval and compliance with the various guidelines. To maintain a stable interest yield on the investment portfolio, the company manages risk through maintenance of a diversified investment portfolio.

Unique asset exposure

The company’s investment portfolio is diversified by property and security type. Management ensures that no investment to a single borrower represents more than 15% of the aggregate cost of the company’s assets. A significant portion of Firm Capital’s mortgage investments are secured by real property located in Ontario, principally in the Toronto. The company receives from the mortgage banker a portion of the commitment fees and discharge fees paid by borrowers.

Bright future outlook

The company’s investment portfolio is based on underwriting completed by a mortgage banker. The investment portfolio is sourced and underwritten by the mortgage banker. The company’s investment portfolio consisted of 196 investments, including a portfolio investment. Management expects that the aggregate interest yield on the company’s investments will be in excess of 400 basis points above the current yield to maturity on one-year Government of Canada treasury bills, which is an excellent rate of return in today’s low-rate environment.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Nikhil Kumar has no position in any of the stocks mentioned.

More on Dividend Stocks

A close up image of Canadian $20 Dollar bills
Dividend Stocks

3 Top Dividend Stocks to Buy Under $20

Given their stable cash flows and high dividend yields, these three under-$20 stocks could boost your passive income.

Read more »

Growing plant shoots on coins
Dividend Stocks

3 Dividend Stocks to Buy During Recession to Lock In a 6% Yield

Make the most of the recession with dividend investing. You can buy stocks for a discount and lock in higher…

Read more »

Dividend Stocks

Put TFSA Cash to Work: Earn a Tax-Free Yield of at Least 5%

By investing your TFSA cash in these stocks, you can earn a reliable and high yield of more than 5%.

Read more »

edit Sale sign, value, discount
Dividend Stocks

3 Dividend Stocks That Are Dirt Cheap Right Now

These dividend stocks remain dirt cheap for investors to consider picking up, with plenty of room for growth in essential…

Read more »

grow dividends
Dividend Stocks

Economists: 100% Chance of a Super Rate Hike in 9 Days

The worries of homebuyers and homeowners will compound further if the Bank of Canada pushes through a super rate hike…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

RRSP Wealth: 2 Top TSX Dividend Stocks to Buy for Total Returns

These TSX dividend stocks look cheap right now and offer RRSP investors at shot at attractive total returns.

Read more »

Dividend Stocks

This Stable, Undervalued REIT Offers Some of the Highest Passive Income

If you want stable passive income that sets you up for long-term growth, this is the top REIT to consider…

Read more »

Happy retirement
Dividend Stocks

Happy Retirement: Do 1 Thing 1st, Then Go All Out on Your TFSA

Canadians using their TFSAs to save for the future need only one foolproof plan to ensure a happy retirement.

Read more »