Superior Plus (TSE:SPB) Will Pay A Dividend Of CA$0.06




  • In Business
  • 2022-12-26 14:37:48Z
  • By Simply Wall St.
 

Superior Plus Corp.'s (TSE:SPB) investors are due to receive a payment of CA$0.06 per share on 16th of January. Based on this payment, the dividend yield on the company's stock will be 6.5%, which is an attractive boost to shareholder returns.

See our latest analysis for Superior Plus

Superior Plus' Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Superior Plus isn't generating any profits, and it is paying out a very high proportion of the cash it is earning. This is quite a strong warning sign that the dividend may not be sustainable.

According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 15%, so there isn't too much pressure on the dividend.

Superior Plus Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the annual payment back then was CA$0.60, compared to the most recent full-year payment of CA$0.72. This works out to be a compound annual growth rate (CAGR) of approximately 1.8% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Company Could Face Some Challenges Growing The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Superior Plus has impressed us by growing EPS at 17% per year over the past five years. Unprofitable companies aren't normally our pick for a dividend stock, but we like the growth that we have been seeing. As long as the company becomes profitable soon, it is on a trajectory that could see it being a solid dividend payer.

An additional note is that the company has been raising capital by issuing stock equal to 14% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Superior Plus' payments, as there could be some issues with sustaining them into the future. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Superior Plus (of which 2 are concerning!) you should know about. Is Superior Plus not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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