Savaria (TSE:SIS) Has Announced A Dividend Of CA$0.042

Savaria Corporation (TSE:SIS) has announced that it will pay a dividend of CA$0.042 per share on the 8th of July. This means the annual payment is 3.6% of the current stock price, which is above the average for the industry.

View 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 making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Over the next year, EPS is forecast to expand rapidly. If the dividend continues along recent trends, we believe we could see the payout ratio reaching 83%, which is definitely on the higher side, but still sustainable.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from CA$0.10 in 2012 to the most recent annual payment of CA$0.50. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 12% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

We're Not Big Fans Of Savaria's Dividend

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Savaria make more consistent payments in the future. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, the dividend is not reliable enough to make this a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 5 warning signs for Savaria (of which 2 are a bit concerning!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.