Rogers Sugar (TSE:RSI) Has Affirmed Its Dividend Of CA$0.09

The board of Rogers Sugar Inc. (TSE:RSI) has announced that it will pay a dividend of CA$0.09 per share on the 12th of October. This makes the dividend yield 5.6%, which will augment investor returns quite nicely.

Check out our latest analysis for Rogers Sugar

Rogers Sugar's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Rogers Sugar was paying out quite a large proportion of both earnings and cash flow, with the dividend being 223% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Over the next year, EPS could expand by 3.4% if the company continues along the path it has been on recently. If recent patterns in the dividend continue, the payout ratio in 12 months could be 81% which is a bit high but can definitely be sustainable.

Rogers Sugar Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the annual payment back then was CA$0.34, compared to the most recent full-year payment of CA$0.36. Dividend payments have grown at less than 1% a year over this period. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings have grown at around 3.4% a year for the past five years, which isn't massive but still better than seeing them shrink. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.

Rogers Sugar's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Rogers Sugar has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about. Is Rogers Sugar 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.