Exane BNP also downgraded the company's shares to 'underperform' from 'neutral', with a 300p target price, combining to make shares one of the biggest fallers on the FTSE 100 on Tuesday.
The asset management group's cash generation is far weaker than earnings generation, Berenberg said, with its analysis suggesting that as little as roughly 60% of its adjusted net income is converted into recurring cash generation.
So, while SLA’s dividend is almost covered by earnings, a much lower proportion of the dividend is funded by recurring cash generation.
Berenberg, which has a 'hold' rating and a target of 343p for the shares, expects the 2019 dividend to consume 215% of recurring cash generation and still constitute 165% of cash flow by 2021.
“With this in mind, we struggle to see how the current dividend is sustainable,” the analysts wrote in the note to clients.
While the group’s management has committed to maintaining dividend per share at 21.6p for 2019 and 2020, the sharp deterioration in the outlook for earnings and cash generation has led to this pressure becoming “acute”, in the analysts’ view.
And even though asset disposals have been used to fund buybacks in recent years, Berenberg estimated it would need to buy back £3.0bn of shares in order to ensure that a 21.6p dividend was covered by recurring cash generation by 2021.
“We view this as neither realistic nor desirable.”
Putting it all together, while the number crunchers say an earlier move would be preferable, they expect management to maintain the current dividend for 2019 and 2020, before rebasing the dividend in 2021.
SLA shares were down 3% to 315.7p in early afternoon trading.