In the world of dividend stocks, there are high yields, and then there’s Fiera Capital (TSX:FSZ). With a staggering 14.63% dividend yield on the TSX today, it’s natural to wonder if this is a golden opportunity for long-term passive income or a risky endeavour. In this article, we’ll delve into Fiera stock. We’ll examine its recent performance, historical background, and the latest earnings report to help you make an informed investment decision.
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A tough year
Fiera stock has had a turbulent year, with its shares starting at $8.80 at the beginning of 2023 and currently hovering at $5.40. This represents a significant decrease in value of about 38%. Over the past five years, the company has undergone various developments and events that have shaped its trajectory. From acquisitions to market expansions, understanding the historical context is crucial to evaluate Fiera stock’s potential as a dividend investment.
That’s why we’re going to delve into Fiera stock’s earnings report. The most recent one for the second quarter may provide clues as to whether Fiera stock is indeed a deal. Or if it’s one stock that investors should avoid for now.
Second-quarter highlights
The most recent earnings report for the second quarter (Q2) of 2023 provides key insights into Fiera stock’s financial health and its ability to sustain its impressive dividend yield. Let’s break down some of the key financial highlights from the report:
In Q2 2023, the dividend stock saw a 1.7% increase in revenue compared to Q1 2023. This rise can be attributed to higher base management fees due to increased average assets under management (AUM) and higher commitment and transaction fees. However, compared to Q2 2022, revenue decreased by 2.4%, primarily due to lower performance fees in specific markets.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for Q2 2023 increased by a remarkable 17.3% compared to Q1 2023. This boost was driven by higher revenue and reduced employee-compensation costs. Although it was slightly lower than Q2 2022, the company maintained an adjusted EBITDA margin of 28.4% in the quarter.
Fiera stock reported a 22.1% increase in adjusted net earnings compared to Q1 2023. Factors contributing to this growth included higher revenues, lower selling, general, and administrative (SG&A) expenses (excluding share-based compensation), and favourable foreign exchange revaluation.
The net earnings attributable to Fiera’s shareholders surged by $13.0 million in Q2 2023 compared to Q1 2023. This increase can be attributed to various factors. This includes lower provisions related to claims, reduced restructuring and acquisition-related costs, and favourable foreign exchange revaluation. It’s also worth noting that the last 12-month (LTM) free cash flow decreased by $64.6 million compared to Q2 2022. This decline can be attributed to various factors. These include lower cash generated by operating activities, higher interest paid on long-term debt, lower distributions received from joint ventures and associates, and increased dividends to non-controlling interests.
What this means looking ahead
Looking ahead, Fiera stock’s future appears to be a mixed bag. The earnings report indicates growth in some areas but challenges in others. Analyst recommendations also reflect this uncertainty. One analyst lowered his target for Fiera stock to $7, below the average of $7.59, with a “sector perform” rating.
The cut came from concerns about net redemptions in sub-advised funds and a lack of sustained positive quarterly net sales. The decline in Fiera’s share price this year may partly stem from these disappointing sales figures.
Bottom line
Considering the recent performance, high dividend yield, and analyst recommendations, investing in Fiera stock at this moment requires careful consideration. While the company has shown positive signs of growth in certain areas, the persistent challenges in net sales may raise concerns for potential investors. It’s essential to assess your risk tolerance and long-term investment goals before diving into a stock with an ultra-high dividend yield like Fiera stock. As with any investment, thorough research and consultation with a financial advisor are crucial to making an informed decision.
