Savaria's (TSE:SIS) Dividend Will Be CA$0.0433

Savaria Corporation (TSE:SIS) will pay a dividend of CA$0.0433 on the 10th of April. Based on this payment, the dividend yield on the company's stock will be 3.1%, which is an attractive boost to shareholder returns.

View our latest analysis for Savaria

Savaria's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before this announcement, Savaria was paying out 91% of earnings, but a comparatively small 62% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Looking forward, earnings per share is forecast to rise by 133.2% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 48% which brings it into quite a comfortable range.

Savaria Has A Solid Track Record

The company has an extended history of paying stable dividends. 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 implies that the company grew its distributions at a yearly rate of about 21% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Has Growth Potential

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 seen EPS rising for the last five years, at 5.7% per annum. 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.

Our Thoughts On Savaria's Dividend

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 is generating plenty of cash, but we still think the dividend is a bit high for comfort. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 3 warning signs for Savaria that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.