It looks like Chartwell Retirement Residences (TSE:CSH.UN) is about to go ex-dividend in the next 4 days. Investors can purchase shares before the 29th of October in order to be eligible for this dividend, which will be paid on the 16th of November.
Chartwell Retirement Residences's next dividend payment will be CA$0.051 per share, and in the last 12 months, the company paid a total of CA$0.61 per share. Calculating the last year's worth of payments shows that Chartwell Retirement Residences has a trailing yield of 5.9% on the current share price of CA$10.32. If you buy this business for its dividend, you should have an idea of whether Chartwell Retirement Residences's dividend is reliable and sustainable. So we need to investigate whether Chartwell Retirement Residences can afford its dividend, and if the dividend could grow.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Chartwell Retirement Residences reported a loss last year, so it's not great to see that it has continued paying a dividend. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Dividends consumed 54% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Chartwell Retirement Residences was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Chartwell Retirement Residences has delivered 1.3% dividend growth per year on average over the past 10 years.
Remember, you can always get a snapshot of Chartwell Retirement Residences's financial health, by checking our visualisation of its financial health, here.
The Bottom Line
Is Chartwell Retirement Residences an attractive dividend stock, or better left on the shelf? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.
So if you're still interested in Chartwell Retirement Residences despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. To that end, you should learn about the 3 warning signs we've spotted with Chartwell Retirement Residences (including 2 which are a bit concerning).
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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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