Sienna Senior Living Inc (TSX:SIA) pays its investors a dividend of 5.2%, which is paid in monthly installments. Although the company does not have a long history of paying dividends, that doesn’t mean that it’s not a great dividend stock to own.
What makes a good dividend stock is sustainability and the likelihood that payouts will continue, as well as the company’s own prospects for growth. After all, dividend income isn’t going to be very useful if you’re just going to use it to offset losses from a declining share price.
One way to measure sustainability is by looking at a company’s free cash flow since it represents how much a company has available to pay out to its shareholders, if it chooses to do so. In each of the past five years, Sienna has seen been able to generate positive free cash, and in its most recent year was able to increase it by 18%. Dividends made up 80% of free cash flow in the past year, and while that may be a bit high, it is manageable and also less than it was in prior years.
Sienna’s prospects for growth suggest there is still a lot of potential for the company to grow its cash and profitability. As the population continues to age and especially as baby boomer retire, there will be more demand for Sienna’s services, and that will ensure a lot of opportunity for the company to continue to produce strong results and potentially strengthen its dividend as well.
In 2017, Sienna’s sales were up over 12% while profits nearly doubled.