Yahoo Finance Don't Buy Sienna Senior Living Inc. (TSE:SIA) For Its Next Dividend Without Doing These Checks
Readers hoping to buy Sienna Senior Living Inc. (TSE:SIA) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Sienna Senior Living's shares on or after the 28th of December, you won't be eligible to receive the dividend, when it is paid on the 15th of January.
The company's next dividend payment will be CA$0.078 per share, and in the last 12 months, the company paid a total of CA$0.94 per share. Last year's total dividend payments show that Sienna Senior Living has a trailing yield of 8.2% on the current share price of CA$11.44. If you buy this business for its dividend, you should have an idea of whether Sienna Senior Living's dividend is reliable and sustainable. 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 typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Sienna Senior Living reported a loss last year, so it's not great to see that it has continued paying a dividend. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Over the past year it paid out 122% of its free cash flow as dividends, which is uncomfortably high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.
Click here to see how much of its profit Sienna Senior Living paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. Sienna Senior Living reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Sienna Senior Living's dividend payments are broadly unchanged compared to where they were 10 years ago.
Get our latest analysis on Sienna Senior Living's balance sheet health here.
The Bottom Line
Has Sienna Senior Living got what it takes to maintain its dividend payments? First, it's not great to see the company paying a dividend despite being loss-making over the last year. Second, the dividend was not well covered by cash flow." With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Sienna Senior Living.
Although, if you're still interested in Sienna Senior Living and want to know more, you'll find it very useful to know what risks this stock faces. Our analysis shows 2 warning signs for Sienna Senior Living and you should be aware of them before buying any shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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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.
