Maple Leaf Foods (TSE:MFI) Has Affirmed Its Dividend Of CA$0.21

Maple Leaf Foods Inc. (TSE:MFI) will pay a dividend of CA$0.21 on the 28th of September. This payment means that the dividend yield will be 2.7%, which is around the industry average.

See our latest analysis for Maple Leaf Foods

Maple Leaf Foods Might Find It Hard To Continue The Dividend

We aren't too impressed by dividend yields unless they can be sustained over time. Despite not generating a profit, Maple Leaf Foods is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Looking forward, earnings per share could 58.0% over the next year if the trend of the last few years can't be broken. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.

Maple Leaf Foods 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. The dividend has gone from an annual total of CA$0.16 in 2013 to the most recent total annual payment of CA$0.84. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Maple Leaf Foods' EPS has fallen by approximately 58% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Maple Leaf Foods (2 are concerning!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.