Sienna Senior Living (TSE:SIA) Has Announced A Dividend Of CA$0.078

The board of Sienna Senior Living Inc. (TSE:SIA) has announced that it will pay a dividend of CA$0.078 per share on the 13th of June. This means that the annual payment will be 5.2% of the current stock price, which is in line with the average for the industry.

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

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. 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 any free cash flow would definitely be difficult to keep up.

Over the next year, EPS could expand by 40.2% if the company continues along the path it has been on recently. Assuming the dividend continues along recent trends, we think the payout ratio could reach 179%, which probably can't continue without starting to put some pressure on the balance sheet.

See our latest analysis for Sienna Senior Living

Sienna Senior Living Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the dividend has gone from CA$0.90 total annually to CA$0.936. Dividend payments have been growing, but very slowly over the period. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Sienna Senior Living's Dividend Might Lack Growth

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Sienna Senior Living has seen EPS rising for the last five years, at 40% per annum. Although earnings per share is up nicely Sienna Senior Living is paying out 216% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

We should note that Sienna Senior Living has issued stock equal to 26% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Sienna Senior Living's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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 probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. To that end, Sienna Senior Living has 4 warning signs (and 2 which are potentially serious) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.