Do these 3 checks before buying Sienna Senior Living Inc. (TSE: SIA) for its next dividend
Readers wishing to buy Sienna Senior Living Inc. (TSE: SIA) for its dividend will have to act shortly, as the stock is about to trade ex-dividend. The ex-dividend date is a business day before a company’s registration date, which is the date the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because the settlement process involves two full business days. So if you miss this date, you will not appear on the books of the company on the date of registration. In other words, investors can buy Sienna Senior Living shares before October 28 in order to be eligible for the dividend, which will be paid on November 15.
The company’s next dividend payment will be C $ 0.078 per share, compared to last year when the company paid a total of C $ 0.94 to shareholders. Looking at the last 12 months of distributions, Sienna Senior Living has a rolling return of approximately 6.5% on its current price of C $ 14.4. We love to see companies pay a dividend, but it’s also important to make sure that laying the golden eggs doesn’t kill our goose that lays the golden eggs! So we need to determine if Sienna Senior Living can afford her dividend and if the dividend could increase.
Check out our latest review for Sienna Senior Living
If a company pays more dividends than it has earned, then the dividend could become unsustainable – which is not an ideal situation. Sienna Senior Living paid a dividend last year despite being unprofitable. This may be a one-time event, but it is not a long-term sustainable situation. With the recent loss, it is important to check whether the company has generated enough cash to pay its dividend. If Sienna Senior Living did not generate enough cash to pay the dividend, she must have paid either cash to the bank or borrowed money, which is not sustainable in the long run. Sienna Senior Living paid out more free cash flow than it generated – 144%, to be precise – last year, which we think is pretty high. It’s hard to consistently pay in more money than you generate without borrowing or using company cash, so we wonder how the company justifies this level of payment.
Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have profits and dividends increased?
Companies with declining profits are tricky from a dividend standpoint. If business goes into recession and the dividend is reduced, the company could experience a sharp drop in value. Sienna Senior Living was unprofitable last year, and unfortunately the general trend suggests that her profits have declined over the past five years, leading us to question whether the dividend is sustainable.
Many investors will assess a company’s dividend yield by evaluating how much dividend payments have changed over time. Sienna Senior Living has generated dividend growth of 1.0% per year on average over the past 10 years.
Get our latest analysis on the health of Sienna Senior Living’s checkup here.
The bottom line
Is Sienna Senior Living an attractive dividend-paying stock, or better still, is it left on the shelf? It’s hard to get used to Sienna Senior Living paying a dividend despite a reported loss in the past year. Worse, the dividend was not well covered by cash flow. Bottom line: Sienna Senior Living has some unfortunate characteristics that we believe could lead to sub-optimal results for dividend investors.
That being said, if you still envision Sienna Senior Living as an investment, you’ll find it helpful to know what risks this stock faces. Our analysis shows 3 warning signs for Sienna Senior Living and you should be aware of this before buying any stocks.
If you are in the dividend-paying stock market, we recommend that you check out our list of the highest dividend-paying stocks with a yield above 2% and a future dividend.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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