Savaria (TSE:SIS) Has Affirmed Its Dividend Of CA$0.0433

The board of Savaria Corporation (TSE:SIS) has announced that it will pay a dividend on the 9th of August, with investors receiving CA$0.0433 per share. The dividend yield will be 2.8% based on this payment which is still above the industry average.

Check out our latest analysis for Savaria

Savaria's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before this announcement, Savaria was paying out 82% of earnings, but a comparatively small 52% of free cash flows. This leaves plenty of cash for reinvestment into the business.

The next year is set to see EPS grow by 34.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 73%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Savaria Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of CA$0.08 in 2014 to the most recent total annual payment of CA$0.52. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

We Could See Savaria's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Savaria has been growing its earnings per share at 8.4% a year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

We should note that Savaria has issued stock equal to 10% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

Our Thoughts On Savaria's Dividend

Overall, a consistent dividend is a good thing, and we think that Savaria has the ability to continue this into the future. The dividend is easily covered by cash flows and has a good track record, but we think the payout ratio might be a bit high. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Savaria that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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