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Sienna Senior Living Inc. (TSE:SIA) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Sienna Senior Living's shares on or after the 31st of December will not receive the dividend, which will be paid on the 15th of January.
The company's next dividend payment will be CA$0.078 per share. Last year, in total, the company distributed CA$0.94 to shareholders. Last year's total dividend payments show that Sienna Senior Living has a trailing yield of 6.0% on the current share price of CA$15.67. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Sienna Senior Living
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Last year, Sienna Senior Living paid out 223% of its profit to shareholders in the form of dividends. This is not sustainable behaviour and requires a closer look on behalf of the purchaser. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the past year it paid out 164% of its free cash flow as dividends, which is uncomfortably high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.
Cash is slightly more important than profit from a dividend perspective, but given Sienna Senior Living's payments were not well covered by either earnings or cash flow, we are concerned about the sustainability of this dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Sienna Senior Living's earnings per share have been growing at 19% a year for the past five years. Earnings are growing pretty quickly, which is great, but it's uncomfortably to see the company paying out 223% of earnings. Unless there are extenuating circumstances, we feel this is a clear concern around the sustainability of the dividend.