Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that NexLiving Communities Inc. (CVE:NXLV) is about to go ex-dividend in just 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase NexLiving Communities' shares on or after the 7th of December will not receive the dividend, which will be paid on the 29th of December.
The company's upcoming dividend is CA$0.01 a share, following on from the last 12 months, when the company distributed a total of CA$0.04 per share to shareholders. Based on the last year's worth of payments, NexLiving Communities stock has a trailing yield of around 2.6% on the current share price of CA$1.55. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether NexLiving Communities has been able to grow its dividends, or if the dividend might be cut.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. NexLiving Communities has a low and conservative payout ratio of just 20% of its income after tax. A useful secondary check can be to evaluate whether NexLiving Communities generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 13% of its cash flow last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see NexLiving Communities has grown its earnings rapidly, up 57% a year for the past five years. NexLiving Communities looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. NexLiving Communities's dividend payments are broadly unchanged compared to where they were three years ago.
To Sum It Up
Is NexLiving Communities an attractive dividend stock, or better left on the shelf? NexLiving Communities has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. NexLiving Communities looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
On that note, you'll want to research what risks NexLiving Communities is facing. Every company has risks, and we've spotted 6 warning signs for NexLiving Communities (of which 1 shouldn't be ignored!) you should know about.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.