Sienna Senior Living (TSE:SIA) Is Due To Pay A Dividend Of CA$0.078

The board of Sienna Senior Living Inc. (TSE:SIA) has announced that it will pay a dividend on the 15th of October, with investors receiving CA$0.078 per share. This means the dividend yield will be fairly typical at 5.2%.

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Sienna Senior Living's Future Dividends May Potentially Be At Risk

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before this announcement, Sienna Senior Living was paying out 234% of what it was earning, and not generating any free cash flows either. 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 43.6% 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 181%, 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

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of CA$0.90 in 2015 to the most recent total annual payment of CA$0.936. Dividend payments have grown at less than 1% a year over this 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

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Sienna Senior Living has grown earnings per share at 44% per 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.

An additional note is that the company has been raising capital by issuing stock equal to 13% of shares outstanding in the last 12 months. 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

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Although they have been consistent in the past, we think the payments are a little high to be sustained. This company is not in the top tier of income providing stocks.

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. To that end, Sienna Senior Living has 3 warning signs (and 2 which don't sit too well with us) 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.