A high-yielding dividend can make for an attractive investment, but it can also be a risky one.
Sienna Senior Living Inc (TSX:SIA) certainly falls into that category. With monthly dividend payments of $0.078, the stock’s paying a dividend yield of just over 9% right now. That’s an astronomical payout and a big reason that it’s that high is shares of Sienna are down more than 40% in 2020.
The COVID-19 pandemic’s heavily impacted its business as some facilities have had outbreaks of the disease. But as of August 11, the company said that all of its residences were “officially out of outbreak status.” Back on June 24, Sienna stated that nine of its residences had cases of COVID-19.
However, investors should be concerned about more than just outbreaks.
In the second quarter, Sienna’s adjusted funds from operations per share were down by 32.6% from the prior-year period and its payout ratio was at 94.4%.
Anytime a stock’s paying more than 90% of its earnings out to shareholders (and it’s not a real estate investment trust), then that’s cause for concern for investors.
But if the worst is truly behind Sienna and it can prevent future outbreaks of COVID-19, it could make for an intriguing investment. Shares of Sienna are trading at just 1.4 times took value and given the stock’s steep decline, there’s definitely the possibility that shares rise in the coming months if the company can prove to investors that things are under control.
Investors may want to wait until the company releases its next quarterly results before investing in this stock to see if Sienna can avoid more outbreaks and if its payout ratio comes down.
