Rogers Sugar's (TSE:RSI) Dividend Will Be CA$0.09

Rogers Sugar Inc. (TSE:RSI) has announced that it will pay a dividend of CA$0.09 per share on the 9th of January. This means the annual payment is 6.0% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Rogers Sugar

Rogers Sugar's Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Rogers Sugar's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 336% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Over the next year, EPS could expand by 21.0% if recent trends continue. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 70% which brings it into quite a comfortable range.

Rogers Sugar 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 last annual payment of CA$0.36 was flat on the annual payment from10 years ago. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Rogers Sugar's Dividend Might Lack Growth

The company's investors will be pleased to have been receiving dividend income for some time. Rogers Sugar has impressed us by growing EPS at 21% per year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Rogers Sugar hasn't been doing.

We should note that Rogers Sugar has issued stock equal to 22% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

Our Thoughts On Rogers Sugar's Dividend

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. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 4 warning signs for Rogers Sugar that investors need to be conscious of moving forward. 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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