Savaria (TSE:SIS) Is Increasing Its Dividend To CA$0.045

Savaria Corporation (TSE:SIS) has announced that it will be increasing its dividend from last year's comparable payment on the 9th of October to CA$0.045. This takes the annual payment to 2.4% of the current stock price, which is about average for the industry.

See our latest analysis for Savaria

Savaria's Future Dividend Projections Appear Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. The last payment made up 80% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

The next year is set to see EPS grow by 28.8%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 72% which brings it into quite a comfortable range.

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 2014, the annual payment back then was CA$0.08, compared to the most recent full-year payment of CA$0.52. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Savaria's Dividend Might Lack Growth

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Savaria has grown earnings per share at 11% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

We should note that Savaria has issued stock equal to 10% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Our Thoughts On Savaria's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. With a reasonable track record and good earnings coverage, the payments look sustainable. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 3 warning signs for Savaria that you should be aware of before investing. 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.