Savaria (TSE:SIS) Has Affirmed Its Dividend Of CA$0.045

The board of Savaria Corporation (TSE:SIS) has announced that it will pay a dividend on the 9th of May, with investors receiving CA$0.045 per share. This makes the dividend yield 3.1%, which will augment investor returns quite nicely.

Our free stock report includes 1 warning sign investors should be aware of before investing in Savaria. Read for free now.

Savaria's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Savaria's dividend made up quite a large proportion of earnings but only 39% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

The next year is set to see EPS grow by 99.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 44%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

See our latest analysis for Savaria

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. Since 2015, the annual payment back then was CA$0.14, compared to the most recent full-year payment of CA$0.54. This works out to be a compound annual growth rate (CAGR) of approximately 14% 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.

Savaria Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Savaria has impressed us by growing EPS at 5.0% per 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.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Savaria's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Savaria that investors should know about before committing capital to this stock. Is Savaria not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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