Savaria's (TSE:SIS) Dividend Will Be CA$0.045

Savaria Corporation's (TSE:SIS) investors are due to receive a payment of CA$0.045 per share on 11th of April. This makes the dividend yield 3.2%, which will augment investor returns quite nicely.

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Savaria's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last payment made up 77% of earnings, but cash flows were much higher. 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%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 44% which brings it into quite a comfortable range.

Check out our latest analysis for Savaria

Savaria Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the dividend has gone from CA$0.14 total annually to 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.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Savaria has seen EPS rising for the last five years, at 5.0% per annum. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

Our Thoughts On Savaria's Dividend

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 has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Savaria that you should be aware of before investing. 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.