Sienna Senior Living (TSE:SIA) Has Affirmed Its Dividend Of CA$0.078

Sienna Senior Living Inc.'s (TSE:SIA) investors are due to receive a payment of CA$0.078 per share on 14th of March. 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 Sienna Senior Living

Estimates Indicate Sienna Senior Living's Could Struggle to Maintain Dividend Payments In The Future

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.

EPS is set to grow by 32.5% over the next year if recent trends continue. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 153% over the next year.

Sienna Senior Living Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was CA$0.90 in 2015, and the most recent fiscal year payment was CA$0.936. Dividend payments have been growing, but very slowly over the period. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Dividend Growth Could Be Constrained

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Sienna Senior Living has been growing its earnings per share at 32% a year over the past five years. EPS has been growing well, but Sienna Senior Living has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

We should note that Sienna Senior Living has issued stock equal to 14% 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.

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

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 2 warning signs for Sienna Senior Living that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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