Dividend investing is a “surefire way” to create recurring passive-income streams. However, some income-focused investors prefer frequent payments to quarterly to add to their monthly budgets or meet liquidity needs. On the TSX, a dividend stock in the financial services sector stands out right now.
Timbercreek Financial (TSX: TF) is a compelling value proposition suitable for income-seekers. Besides the high yield, it pays cash every month. At $6.68 per share, the dividend yield is a mouth-watering 10.36%. A $6,680 investment (1,000 shares) will generate $57.67 in monthly passive income. The income is tax-free if you hold the stock in your Tax-Free Savings Account (TFSA).
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Bridge financing
Timbercreek Financial provides financing solutions, primarily short-term, structured mortgages, to qualified real estate investors. The risk strategy of this $552.8 million non-bank lender is simple: lend only against income-producing real estate or cash-flowing properties (multi-residential, retail and office).
Clients turn to Timbercreek to fulfill their funding requirements because traditional lenders don’t extend bridge financing. The loan purpose is to repair and redevelop existing properties or purchase another investment property. When the transition is over, clients apply for longer-term traditional bank mortgages. They use the proceeds to pay the bridge financier or Timbercreek.
Improved market environment
Elevated interest rates impacted Timbercreek’s financial performance in 2024. Net income declined 31% year-over-year to $46.2 million. Nonetheless, at the end of the fourth quarter (Q4) of 2024, the net mortgage portfolio rose 15% to $1.09 billion versus Q4 2023 because of an improved market environment.
Blair Tamblyn, chief executive officer of Timbercreek Financial, said, “During 2024, we saw many commercial real estate asset classes emerging from a challenging post-pandemic environment, resulting in a significant improvement in the company’s business fundamentals in recent quarters.” The strong originations in Q4 helped the portfolio to grow materially compared to 2023.
Despite the challenging environment, Tamblyn added, “We were also pleased with the distributable income results for 2024, continuing our long track record of stable monthly dividends. We are confident in our ability to drive higher transaction volumes and strong net investment income and distributable income in 2025.”
Timbercreek generated $64.9 million in distributable income for the year. Performance-wise, the stock delivered a +17% overall return on top of the generous monthly dividends. At its current price, the year-to-date loss is -3.92%.
On February 25, 2025, Timbercreek formally announced its entry into the Canada Mortgage and Housing Corporation (CMHC) lending market. Its wholly-owned subsidiary, Timbercreek Mortgage Servicing Inc., obtained CHMC approval to be a National Housing Act (NHA)-approved lender.
Market outlook
Real experts say multiple rate cuts by the Bank of Canada provide relief to commercial real estate investors. However, they remain wary of economic headwinds, including tariff changes. Still, most market observers remain optimistic. They see renewed investor appetite and increased capital allocation into commercial real estate in the second half of 2025.
If the market returns to a stable and more accommodating funding environment, expect Timbercreek Financial to thrive. Commercial real estate investors would need a lender for transitional income assets. Moreover, because of the Canadian market’s strong foundational fundamentals, the long-term outlook for commercial real estate is positive, with strong returns.
