Do These 3 Checks Before Buying Chartwell Retirement Residences (TSE:CSH.UN) For Its Upcoming Dividend
It looks like Chartwell Retirement Residences (TSE:CSH.UN) is about to go ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Chartwell Retirement Residences' shares before the 28th of December in order to receive the dividend, which the company will pay on the 15th of January.
The company's next dividend payment will be CA$0.051 per share. Last year, in total, the company distributed CA$0.61 to shareholders. Based on the last year's worth of payments, Chartwell Retirement Residences has a trailing yield of 5.3% on the current stock price of CA$11.58. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for Chartwell Retirement Residences
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Chartwell Retirement Residences's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Chartwell Retirement Residences didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It paid out 78% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.
Click here to see how much of its profit Chartwell Retirement Residences paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Chartwell Retirement Residences was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
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.
Get our latest analysis on Chartwell Retirement Residences's balance sheet health here.
The Bottom Line
Is Chartwell Retirement Residences an attractive dividend stock, or better left on the shelf? It's hard to get used to Chartwell Retirement Residences paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.
With that in mind though, if the poor dividend characteristics of Chartwell Retirement Residences don't faze you, it's worth being mindful of the risks involved with this business. Case in point: We've spotted 2 warning signs for Chartwell Retirement Residences you should be aware of.
If you're in the market for strong dividend payers, we recommend checking 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.
