Rogers Sugar Inc. (TSE:RSI) will pay a dividend of CA$0.09 on the 13th of July. This makes the dividend yield 5.9%, which will augment investor returns quite nicely.
Check out our latest analysis for Rogers Sugar
Rogers Sugar's Distributions May Be Difficult To Sustain
A big dividend yield for a few years doesn't mean much if it can't be sustained. Rogers Sugar is unprofitable despite paying a dividend, and it is paying out 186% of its free cash flow. These payout levels would generally be quite difficult to keep up.
Recent, EPS has fallen by 14.1%, so this could continue over the next year. 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.
Rogers Sugar Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The payments haven't really changed that much since 10 years ago. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
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, initial appearances might be deceiving. Over the past five years, it looks as though Rogers Sugar's EPS has declined at around 14% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.
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 Rogers Sugar's payments, as there could be some issues with sustaining them into the future. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 4 warning signs for Rogers Sugar (3 can't be ignored!) that you should be aware of before investing. 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.
About TSX:RSI
Rogers Sugar
Engages in refining, packaging, marketing, and distribution of sugar and maple products in Canada, the United States, Europe, and internationally.
Good value with adequate balance sheet and pays a dividend.
