Chartwell Retirement Residences (TSE:CSH.UN) Has Announced A Dividend Of CA$0.051

Chartwell Retirement Residences (TSE:CSH.UN) has announced that it will pay a dividend of CA$0.051 per share on the 15th of February. Based on this payment, the dividend yield will be 5.3%, which is fairly typical for the industry.

See our latest analysis for Chartwell Retirement Residences

Chartwell Retirement Residences' Distributions May Be Difficult To Sustain

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Chartwell Retirement Residences is unprofitable despite paying a dividend, and it is paying out 104% of its free cash flow. This is quite a strong warning sign that the dividend may not be sustainable.

Analysts expect EPS to fall by 59.5% over the next year. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.

Chartwell Retirement Residences Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the dividend has gone from CA$0.54 total annually to CA$0.612. This implies that the company grew its distributions at a yearly rate of about 1.3% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Chartwell Retirement Residences' EPS has fallen by approximately 12% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 3 warning signs for Chartwell Retirement Residences that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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