With fears of a housing bubble making headlines again in Canada, many investors are wondering how to protect their portfolios if home prices finally take a dive. Interest rates remain high, inflation is still sticky, and debt levels among Canadian households are near record highs. All of that adds up to a recipe for pressure in the housing market. So, if the bubble bursts, what should you buy? One dividend stock that stands out is Timbercreek Financial (TSX: TF), a mortgage lender that could offer both stability and income in a declining real estate environment.
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About Timbercreek
Timbercreek Financial isn’t your typical real estate investment. It doesn’t build homes, manage condos, or sell property. Instead, it provides short-term, structured mortgage loans to commercial real estate investors across Canada. These loans are used for income-producing properties like apartment buildings and mixed-use developments. The dividend stock focuses on first mortgages with conservative loan-to-value ratios, meaning it has a buffer if property values drop. It earns steady income from interest payments, which it passes on to shareholders through regular monthly dividends.
The real appeal of Timbercreek is that it provides reliable cash flow. As of writing, its stock trades at around $7.63 and offers an annual dividend of $0.69, which is dished out monthly. That works out to a yield of approximately 9%, which is well above average on the TSX. For income-focused investors, especially those with a Tax-Free Savings Account (TFSA), that kind of return is hard to ignore. And if housing prices decline but the underlying assets remain rented and occupied, Timbercreek can continue collecting interest and paying dividends without major disruption. In fact, right now, the dividend stock could bring in $903.90 in annual income from a $10,000 investment! That’s about $75.32 each month!
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND (annual) | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| TF | $7.63 | 1,310 | $0.69 | $903.90 | Monthly | $9,995.30 |
Into earnings
In its most recent earnings report for the first quarter (Q1) of 2025, Timbercreek reported revenue of $28.6 million, up from $27.2 million in the previous quarter. Net income came in at $18.1 million, or $0.18 per share, slightly ahead of analyst expectations. The dividend stock’s loan portfolio stood at $1.13 billion, with an average loan-to-value ratio of 65%, suggesting it has a solid margin of safety in case of asset devaluation. Management also reported that 98% of its loans were performing, which indicates the business is still strong despite broader economic concerns.
Now, it’s true that Timbercreek’s payout ratio sometimes exceeds 100%. That might seem like a red flag, but for mortgage investment corporations, this isn’t unusual. Because most of their income is distributed to shareholders, these companies often operate with thin retained earnings. The key is whether cash flow covers the dividend, and so far, Timbercreek continues to generate enough distributable income to do just that.
Looking ahead
If housing prices were to fall dramatically, there would be risks. A prolonged correction could cause some borrowers to default, which would eat into earnings. However, Timbercreek’s diversified portfolio, conservative underwriting standards, and senior secured loans give it insulation against that risk. It doesn’t rely on house flippers or high-risk residential borrowers. Its focus is on established income-generating properties that can weather short-term volatility.
In addition to its core lending business, Timbercreek also benefits from higher interest rates. Since its loans are typically floating rate, increases in the Bank of Canada’s policy rate can boost its earnings. So, while higher rates might hurt housing prices, they can help Timbercreek’s income, giving it a unique advantage in this environment.
Bottom line
For investors who believe the housing market is overvalued, Timbercreek Financial is one of the few TSX-listed names that could perform well during a correction. It offers income stability, portfolio protection, and a monthly payout that beats most fixed-income options. You won’t get massive capital gains here, but you will get dependable income, even if housing prices start falling.
