Sienna Senior Living Inc.'s (TSE:SIA) investors are due to receive a payment of CA$0.078 per share on 15th of November. This means the annual payment is 6.0% of the current stock price, which is above the average for the industry.
Sienna Senior Living Might Find It Hard To Continue The Dividend
If the payments aren't sustainable, a high yield for a few years won't matter that much. Sienna Senior Living is unprofitable despite paying a dividend, and it is paying out 145% of its free cash flow. This is quite a strong warning sign that the dividend may not be sustainable.
Looking forward, earnings per share could 44.4% over the next year if the trend of the last few years can't be broken. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.
Sienna Senior Living Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was CA$0.85 in 2011, and the most recent fiscal year payment was CA$0.94. Dividend payments have been growing, but very slowly over the period. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
Dividend Growth Potential Is Shaky
The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Sienna Senior Living's EPS has fallen by approximately 44% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.
Sienna Senior Living's Dividend Doesn't Look Sustainable
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. Although they have been consistent in the past, we think the payments are a little high to be sustained. We don't think Sienna Senior Living is a great stock to add to your portfolio if income is your focus.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for Sienna Senior Living that investors need to be conscious of moving forward. We have also put together a list of global stocks with a solid dividend.
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.
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