3/8/25
FirstService Corporation (FSV) operates in the property services industry, managing residential communities and providing restoration and cleaning solutions. While it’s not a stock that will catch the eye of high-yield dividend seekers, its steady growth and consistent cash flow make it an interesting option for long-term investors focused on stability and income.
The company has built a strong position in a fragmented industry, giving it room to expand through acquisitions. With a market cap of $7.81 billion and a history of solid revenue growth, FirstService has developed a reputation as a leader in outsourced real estate services. Its dividend may not be the main attraction, but when combined with the company’s financial health and potential for appreciation, it deserves a closer look.
Key Dividend Metrics
📌 Forward Dividend Yield: 0.64%
📌 Trailing Dividend Yield: 0.58%
📌 5-Year Average Dividend Yield: 0.54%
📌 Forward Annual Dividend Rate: $1.10 per share
📌 Payout Ratio: 33.67% (Sustainable and leaves room for growth)
📌 Ex-Dividend Date: March 31, 2025
📌 Next Dividend Payment: April 7, 2025
Dividend Overview
FirstService isn’t the kind of stock that dividend investors turn to for big income, but it does offer steady and reliable payouts. With a forward yield of 0.64%, it’s certainly on the lower end, but that’s largely because the company is still in growth mode.
One of the key strengths of FirstService’s dividend is sustainability. The payout ratio sits at 33.67%, meaning the company is only using a third of its earnings to pay shareholders. That leaves plenty of capital available for reinvestment and future dividend increases.
Compared to real estate investment trusts (REITs) or high-yield stocks, FirstService’s dividend strategy is different. Rather than maximizing payouts today, the company prioritizes a balance between dividends and reinvestment in its business, which has helped drive long-term appreciation.
Dividend Growth and Safety
FirstService has a history of gradually increasing its dividend over time. The five-year average dividend yield of 0.54% shows that while the payout has grown, the stock price has generally risen faster. That’s a good sign for total return investors who want both income and capital appreciation.
Dividend safety looks strong. The company generates solid free cash flow, with $142.91 million in levered free cash flow over the past year. This ensures it can maintain and even grow its dividend without putting stress on its balance sheet.
That said, FirstService does carry a fair amount of debt. Its debt-to-equity ratio sits at 95.67%, which is higher than ideal. While cash flow supports the company’s obligations, any economic slowdown could put some pressure on future dividend growth.
Chart Analysis
Price Action and Trend
The stock has been in a downtrend over the last few months after peaking above 190. The 50-day moving average has rolled over and is now trending downward, while the 200-day moving average continues to rise but at a slower pace. This suggests that momentum has shifted to the downside, with price now hovering just above the 200-day moving average, an important level of support.
Moving Averages and Support Levels
The 50-day moving average, which was previously a level of support during the rally, has now turned into resistance. The stock recently attempted to reclaim this level but was rejected. Meanwhile, the 200-day moving average is acting as the last line of defense, with price testing it multiple times. A clean break below could signal further downside, while a bounce could indicate an attempt to stabilize.
Volume Analysis
Volume has been mixed, with spikes on both green and red days. The increase in volume during the pullback suggests that sellers have been more aggressive, possibly locking in profits from the strong uptrend seen in the second half of last year. However, recent volume has been more balanced, indicating that buyers are stepping in at these levels.
Relative Strength Index (RSI)
The RSI has been trending lower and is now approaching oversold territory. This suggests that the stock is under selling pressure, but it also means there could be a potential for a short-term bounce if buyers start to step in. If the RSI dips below 30, it could indicate that the stock is oversold, which might attract bargain hunters.
Recent Candles and Buying/Selling Pressure
The last five candlesticks show a mix of indecision and downward pressure. There have been a few attempts to push higher, but each rally has been met with selling, leading to wicks on the top of the candles. This indicates that while there is some buying interest, sellers remain in control. The presence of lower wicks on recent candles, however, suggests some level of support is forming, but it has yet to translate into sustained upward momentum.
Analyst Ratings
📈 Upgrades
🔹 In late January, Raymond James increased its price target for FirstService from $215 to $225, maintaining an “outperform” rating. This positive adjustment was based on the company’s strong financial performance and steady growth in its property services segment. Analysts pointed to FirstService’s successful expansion strategy and its ability to navigate market challenges as reasons for their optimism. They also noted that the company’s ability to generate consistent revenue growth despite economic headwinds was a key factor in their bullish stance.
📉 Downgrades
🔹 On March 7, StockNews.com downgraded FirstService from a “buy” to a “hold” rating. This change was driven by valuation concerns and a recent deceleration in revenue growth. Analysts expressed caution that the stock’s high price-to-earnings ratio might limit its short-term upside, especially if earnings growth does not keep pace with investor expectations. While FirstService has a strong business model, concerns over whether its current valuation is justified led to a more cautious outlook from some analysts.
📊 Consensus Price Target
📌 As of the latest updates, the average 12-month price target among six analysts is $201.67, representing a potential 13.94% upside from current levels. Analyst targets range from a low of $182 to a high of $225, showing a mix of bullish and cautious views on the stock’s future. Some analysts believe that FirstService’s expansion and consistent cash flow support further stock appreciation, while others remain wary of its premium valuation in the current market environment.
These mixed ratings highlight the importance of evaluating both the growth potential and valuation risks when considering FirstService as an investment.
Earnings Report Summary
FirstService Corporation recently shared its latest earnings, and the results show strong growth across its business. The company wrapped up the fourth quarter and full-year 2024 with solid gains, demonstrating that its property services and restoration divisions continue to expand at a steady pace.
Fourth-quarter revenue came in at $1.37 billion, marking a 27 percent increase compared to the same period last year. About 10 percent of that growth was organic, meaning the company wasn’t just relying on acquisitions but also seeing real demand for its services. Adjusted EBITDA rose 33 percent to $137.9 million, reflecting improved efficiency and profitability. Earnings per share also moved higher, rising 21 percent to $1.34.
For the full year, FirstService generated $5.22 billion in revenue, a 20 percent increase over the prior year. Adjusted EBITDA climbed 24 percent to $513.7 million, while earnings per share finished at $5.00, a 7 percent gain. These numbers suggest that the company is executing well on its long-term strategy, delivering steady earnings growth and maintaining a strong financial position.
Breaking the results down further, FirstService Residential, the company’s property management division, reported $521.3 million in fourth-quarter revenue, up 5 percent from last year. This growth was fueled by new contracts and ongoing expansion into additional communities. Meanwhile, FirstService Brands, which includes its restoration services, saw a major jump in revenue, climbing 45 percent to $844.1 million. A combination of organic growth and acquisitions helped drive these numbers, with weather-related events and large insurance claims playing a role in the strong performance.
One of the biggest highlights from the quarter was the strength of the restoration business, which saw a 40 percent revenue increase. Brands like Paul Davis and FirstOnSite played a major role in this growth, benefiting from increased demand for disaster recovery services. Additionally, the company’s recent acquisition of Roofing Corp of America contributed significantly to fourth-quarter results and is expected to drive a revenue increase of 50 percent or more in early 2025.
In addition to its strong financial results, FirstService also increased its annual dividend by 10 percent, raising it to $1.10 per share. This move signals management’s confidence in the company’s continued growth and its commitment to returning value to shareholders.
Overall, FirstService delivered a solid quarter and full-year performance, with continued momentum in its core businesses. With a mix of organic growth, smart acquisitions, and a growing dividend, the company appears well-positioned for the future.
Financial Health and Stability
FirstService has been delivering strong financial results. Over the past year, revenue hit $5.22 billion, with a notable 26.5% year-over-year increase in the most recent quarter. That kind of growth is impressive, especially in a business focused on property services.
Profitability is solid, though not spectacular. The company’s operating margin is 6.18%, while its profit margin sits at 2.58%. That’s fairly typical for businesses in this sector, which rely on service-based revenue streams.
Cash flow is a strong point. The company generated $285.67 million in operating cash flow, which provides flexibility for paying dividends, reinvesting in the business, and managing debt. While FirstService does carry $1.57 billion in total debt, it also has $227.6 million in cash on hand, helping balance out its financial position.
Valuation and Stock Performance
Valuation is where FirstService starts to look a little expensive. The stock currently trades at 57.52 times trailing earnings, which is a high multiple. However, the forward P/E ratio drops to 29.94, indicating analysts expect earnings to grow in the coming years.
Over the past year, the stock has traded between $141.26 and $197.84. The current price of $170.79 is slightly below its 50-day moving average of $178.56 and close to the 200-day moving average of $174.87. This suggests the stock has pulled back in recent weeks but remains near long-term support levels.
With a beta of 0.97, FirstService moves roughly in line with the broader market. It’s not highly volatile, making it a relatively stable choice compared to more aggressive growth stocks.
Risks and Considerations
🔹 High Valuation – Trading at nearly 30 times forward earnings, FirstService is priced for growth. If earnings fall short, the stock could see a pullback.
🔹 Debt Levels – With a debt-to-equity ratio near 96%, the company has significant leverage. Rising interest rates could make debt servicing more expensive over time.
🔹 Low Dividend Yield – While stable and growing, a 0.64% yield isn’t enough to satisfy investors looking for high income.
🔹 Economic Sensitivity – Although property management services are relatively resilient, the restoration and real estate services segments could see volatility if market conditions shift.
🔹 Competitive Industry – The property services industry is fragmented, and while FirstService has done well with acquisitions, successfully integrating new businesses always carries some risks.
Final Thoughts
FirstService Corporation isn’t your typical dividend stock, but that doesn’t mean it’s not worth considering. For investors looking for a combination of stability, growth, and a reliable (albeit small) dividend, this stock checks a lot of boxes.
The company’s strong cash flow, reasonable payout ratio, and history of steady dividend increases make it a solid option for long-term investors. While the yield won’t excite income seekers, the total return potential—driven by a mix of dividends and capital appreciation—makes it attractive for those with a longer time horizon.
The biggest risks here are valuation and debt levels. At its current price, FirstService isn’t cheap, and its reliance on leverage means interest rate movements could have an impact. However, for investors who can look past the modest yield and focus on overall business strength, this stock remains a compelling choice for a well-balanced portfolio.
Recent Comments