Savaria (TSE:SIS) Is Paying Out A Dividend Of CA$0.0433

The board of Savaria Corporation (TSE:SIS) has announced that it will pay a dividend of CA$0.0433 per share on the 10th of May. The dividend yield will be 3.1% based on this payment which is still above the industry average.

See our latest analysis for Savaria

Savaria's Earnings Easily Cover The Distributions

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 91% of earnings, but a comparatively small 62% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 140.5% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 46% which would be quite comfortable going to take the dividend forward.

Savaria Has A Solid Track Record

The company has an extended history of paying stable dividends. 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 Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. Savaria has impressed us by growing EPS at 5.7% 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.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 3 warning signs for Savaria that investors need to be conscious of moving forward. Is Savaria not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.