Chartwell Retirement Residences (TSE:CSH.UN) Is Due To Pay A Dividend Of CA$0.051

The board of Chartwell Retirement Residences (TSE:CSH.UN) has announced that it will pay a dividend on the 15th of April, with investors receiving CA$0.051 per share. The dividend yield will be 4.9% based on this payment which is still above the industry average.

View our latest analysis for Chartwell Retirement Residences

Chartwell Retirement Residences Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, the company's dividend was higher than its profits, and made up 92% of cash flows. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.

Looking forward, EPS could fall by 36.7% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 2,290%, which is definitely a bit high to be sustainable going forward.

Chartwell Retirement Residences Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the first annual payment was CA$0.54, compared to the most recent full-year payment of CA$0.61. This means that it has been growing its distributions at 1.3% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Earnings per share has been sinking by 37% over the last 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 Chartwell Retirement Residences' 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. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Chartwell Retirement Residences has 4 warning signs (and 2 which are a bit unpleasant) we think you should know about. Is Chartwell Retirement Residences not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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