What do you seek in a dividend stock? Yield, regular dividends, dividend growth, an option of dividend reinvestment (DRIP)? Fiera Capital (TSX: FSZ) can offer you it all. The subdued stock market performance in 2024 affected the returns of several asset management firms, including Fiera Capital whose stock price has dipped 39% since December 2024. This dip inflated its dividend yield to 14%.
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Why did Fiera Capital stock fall 39%?
Fiera Capital is an asset management firm with $167.1 billion in assets under management (AUM) as of December 31, 2024. The company invests in public and private markets for Institutional clients, Financial Intermediaries, and Private Wealth clients across Canada, the United States, Europe, the Middle East, Africa (“EMEA”), and key markets in Asia. Its key source of revenue is the base management fee, which is a percentage of AUM. It also earns performance fees if the portfolio does well, as well as transaction fees.
The weak equity market performance halved Fiera’s performance fee revenue to $24.7 million in 2024. The company reported flat revenue growth in 2024 as a higher base management fee offset the weakness in performance fees. However, its earnings per share (EPS) dipped 59% to $0.23 as its selling, general, and administrative (SG&A) expenses and foreign exchange revaluation expenses increased.
Fiera Capital has moved from a global distribution model to a regionalized distribution model, which required the opening of new offices and hiring of regional CEOs. This increased its SG&A expenses. However, the new model is expected to drive future AUM growth as proximity to clients increases.
Should you be concerned about the 14% dividend yield?
Fiera Capital has a stable source of earnings from base management fees, which gives it enough cash flow to pay dividends. The performance fee determines the stock price momentum.
If you look at Fiera Capital’s stock price volatility, it outperforms in a bull market and underperforms in a bear market. The stock surged 113% in the pandemic bull run from the March 2020 dip to the November 2021 peak. It next rallied 88% between November 2023 to March 2024 when the Bank of Canada paused the interest rate hike. The next rally of 47% came between mid-June and mid-November 2024 when the interest rate cut began.
Similarly, the stock fell in all bear momentum periods of the 2022 tech stock sell-off, the 2023 interest rate hike and high inflation, and now the Trump tariff uncertainty.
The company has been paying regular dividends for the last 15 years and has grown them in 10 years. It also offers DRIP, allowing you to compound your returns.
Grab this 14% dividend yield before it is gone
Now that you know the nature of Fiera Capital stock’s momentum, you can make the most of it by buying the dip and locking in a higher yield. The stock could rally in a bull run as strong equity returns increase its performance fees.
One investing strategy could be to buy every dip and accumulate a sizeable number of shares at a cost that gives a yield of more than 10%. At intervals, you could sell some shares in a bull market and use the capital appreciation to buy more shares on the dip.
For instance, if you invest $5,000 now you can buy 815 shares at $6.13 per share and earn a $700 annual dividend. You can keep 515 shares to buy and hold, and use 300 shares for frequent capital gains.
When Fiera’s share price reaches $9.50, you can sell 300 shares and get $2,850 and use this amount to buy 438 shares when the price falls to $6.50. You will have 515 shares from the first purchase and 438 shares from the second purchase, increasing the count to 953 shares. Your annual dividend amount would increase to $820.
The 515 shares can be invested in a DRIP where the dividend amount will keep buying Fiera’s shares quarterly, automating the compounding process even if you miss a dip and rally.
