Sienna Senior Living (TSE:SIA) Is Paying Out A 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 15th of August. This payment means that the dividend yield will be 5.0%, which is around the industry average.

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

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before this announcement, Sienna Senior Living was paying out 216% 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 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 40.1% over the next year if recent trends continue. If the dividend continues on its recent course, the payout ratio in 12 months could be 180%, which is a bit high and could start applying pressure to the balance sheet.

View our latest analysis for Sienna Senior Living

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. 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 could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Sienna Senior Living has been growing its earnings per share at 40% a year over the past five years. While EPS is growing rapidly, Sienna Senior Living paid out a very high 216% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.

An additional note is that the company has been raising capital by issuing stock equal to 26% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

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. Although they have been consistent in the past, we think the payments are a little high to be sustained. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 4 warning signs for Sienna Senior Living (of which 2 shouldn't be ignored!) you should know about. Is Sienna Senior Living not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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