Rogers Sugar Inc. (TSE:RSI) has announced that it will pay a dividend of CA$0.09 per share on the 16th of July. This makes the dividend yield 6.4%, which will augment investor returns quite nicely.

We've discovered 2 warning signs about Rogers Sugar. View them for free.

Rogers Sugar's Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Rogers Sugar's dividend was making up a very large proportion of earnings, and the company was also not generating any cash flow to offset this. We think that this practice can make the dividend quite risky in the future.

Over the next year, EPS could expand by 15.6% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 63%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Rogers Sugar

Rogers Sugar Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The most recent annual payment of CA$0.36 is about the same as the annual payment 10 years ago. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Rogers Sugar has been growing its earnings per share at 16% a year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Rogers Sugar is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Rogers Sugar (1 is a bit unpleasant!) that you should be aware of before investing. Is Rogers Sugar not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.