Superior Plus' (TSE:SPB) Dividend Will Be CA$0.06

Superior Plus Corp. (TSE:SPB) will pay a dividend of CA$0.06 on the 15th of June. Based on this payment, the dividend yield on the company's stock will be 5.9%, which is an attractive boost to shareholder returns.

View our latest analysis for Superior Plus

Superior Plus Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Earnings per share is forecast to rise by 100.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 143%, which probably can't continue putting some pressure on the balance sheet.

Superior Plus' Track Record Isn't Great

The dividend hasn't seen any major cuts in the last 10 years, but it has slowly been decreasing. The first annual payment during the last 10 years was CA$1.20 in 2012, and the most recent fiscal year payment was CA$0.72. This works out to be a decline of approximately 5.0% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Superior Plus' EPS has fallen by approximately 12% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

We'd also point out that Superior Plus has issued stock equal to 15% of shares outstanding. 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 Superior Plus' 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 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. Just as an example, we've come across 5 warning signs for Superior Plus you should be aware of, and 2 of them shouldn't be ignored. 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.