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

Maple Leaf Foods Inc. (TSE:MFI) has announced that it will pay a dividend of CA$0.21 per share on the 28th of September. This payment means that the dividend yield will be 2.9%, which is around the industry average.

Check out 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 means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.

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. Since 2013, the annual payment back then was CA$0.16, compared to the most recent full-year payment of CA$0.84. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. 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 Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Maple Leaf Foods' earnings per share has shrunk at 58% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Maple Leaf Foods' payments, as there could be some issues with sustaining them into the future. 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. We don't think Maple Leaf Foods is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Maple Leaf Foods you should be aware of, and 2 of them are a bit concerning. Is Maple Leaf Foods 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.