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Highlights
- Upcoming dividend payment of CA$0.19 per share
- Concerns over sustainability due to non-profit generating status
- Dividend history shows solid track record with potential risks
Saputo Inc. (TSE:SAP) has declared a dividend of CA$0.19 per share, set to be disbursed on March 14th. This results in a dividend yield of 3.2%, which aligns with the industry average.
Financial Insights
Although a reliable dividend yield is attractive, it's important to assess its feasibility. Currently, Saputo is not profitable, yet their free cash flow sufficiently covers the dividend, allowing for reinvestment in business operations. Cash flow is often deemed more crucial than accounting profits, justifying a certain level of comfort with this dividend payout.
Future Prospects
Earnings per Share (EPS) are expected to surge by 130.0% in the next year. If the dividend maintains its current trajectory, the payout ratio could escalate significantly, potentially pressuring the company's balance sheet.
Historical Performance
Saputo has consistently distributed dividends over the years. The annual dividend grew from CA$0.46 in 2015 to CA$0.76 recently, marking a compound annual growth rate of approximately 5.1%. Such consistent growth could be valuable if sustained long-term.
Outlook on Dividend Growth
Despite a stable dividend history, some caution is warranted due to the company's EPS declining by roughly 19% annually over the past five years. While a recovery in earnings is anticipated in the coming year, a sustained pattern of growth is yet to be established.
While Saputo remains consistent with its dividend payments, there are concerns about its suitability as a prime dividend stock. The company generates substantial cash; however, the current dividend level appears slightly ambitious for a comfort zone geared towards income-focused investing.
