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Sienna Senior Living Inc. (TSE:SIA) has announced that it will pay a dividend of CA$0.078 per share on the 14th of March. This means the annual payment is 5.7% of the current stock price, which is above the average for the industry.
Check out our latest analysis for Sienna Senior Living
Sienna Senior Living's Projections Indicate Future Payments May Be Unsustainable
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. This high of a dividend payment could start to put pressure on the balance sheet in the future.
Earnings per share could rise by 32.6% over the next year if things go the same way as they have for the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 153%, which probably can't continue without starting to put some pressure on the balance sheet.
Sienna Senior Living Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. 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. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
Sienna Senior Living's Dividend Might Lack Growth
Investors could be attracted to the stock based on the quality of its payment history. Sienna Senior Living has impressed us by growing EPS at 33% per year over the past five years. While EPS is growing rapidly, Sienna Senior Living paid out a very high 223% 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.
We should note that Sienna Senior Living has issued stock equal to 13% 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
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. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would probably look elsewhere for an income investment.