Yahoo Finance Extendicare's (TSE:EXE) Dividend Will Be CA$0.04
The board of Extendicare Inc. (TSE:EXE) has announced that it will pay a dividend on the 15th of December, with investors receiving CA$0.04 per share. Based on this payment, the dividend yield on the company's stock will be 7.1%, which is an attractive boost to shareholder returns.
See our latest analysis for Extendicare
Extendicare Is Paying Out More Than It Is Earning
If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.
If the company can't turn things around, EPS could fall by 63.3% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 50,531%, which is definitely a bit high to be sustainable going forward.
Extendicare's Track Record Isn't Great
The dividend is currently lower than it was 10 years ago, indicating that there has been a downward trend over that time. The annual payment during the last 10 years was CA$0.84 in 2012, and the most recent fiscal year payment was CA$0.48. This works out to be a decline of approximately 5.4% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.
Dividend Growth Potential Is Shaky
Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Extendicare's earnings per share has shrunk at 63% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.
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 Extendicare's payments, as there could be some issues with sustaining them into the future. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 5 warning signs for Extendicare you should be aware of, and 2 of them are a bit unpleasant. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
