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 16th of April. The dividend yield will be 6.5% based on this payment which is still above the industry average.

View our latest analysis for Rogers Sugar

Rogers Sugar's Payment Could Potentially Have 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 a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. This is a pretty unsustainable practice, and could be risky if continued for the long term.

Over the next year, EPS could expand by 18.1% if recent trends continue. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 69% which brings it into quite a comfortable range.

Rogers Sugar Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. There hasn't been much of a change in the dividend over the last 10 years. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Rogers Sugar Might Find It Hard To Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Rogers Sugar has grown earnings per share at 18% per year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

We should note that Rogers Sugar has issued stock equal to 22% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Our Thoughts On Rogers Sugar's Dividend

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. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 (1 is a bit 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.