Chartwell Retirement Residences (TSE:CSH.UN) Will Pay A CA$0.051 Dividend In Four Days

Chartwell Retirement Residences (TSE:CSH.UN) stock is about to trade ex-dividend in four days. The ex-dividend date is usually set to be one business day before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Chartwell Retirement Residences' shares on or after the 30th of June will not receive the dividend, which will be paid on the 15th of July.

The company's next dividend payment will be CA$0.051 per share, on the back of last year when the company paid a total of CA$0.61 to shareholders. Looking at the last 12 months of distributions, Chartwell Retirement Residences has a trailing yield of approximately 3.4% on its current stock price of CA$17.96. 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! So we need to investigate whether Chartwell Retirement Residences can afford its dividend, and if the dividend could grow.

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Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. An unusually high payout ratio of 297% of its profit suggests something is happening other than the usual distribution of profits to shareholders. A useful secondary check can be to evaluate whether Chartwell Retirement Residences generated enough free cash flow to afford its dividend. Dividends consumed 51% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Chartwell Retirement Residences fortunately did generate enough cash to fund its dividend. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.

See our latest analysis for Chartwell Retirement Residences

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Chartwell Retirement Residences has grown its earnings rapidly, up 110% a year for the past five years.

We'd also point out that Chartwell Retirement Residences issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Chartwell Retirement Residences has delivered 1.3% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Chartwell Retirement Residences is keeping back more of its profits to grow the business.

The Bottom Line

Has Chartwell Retirement Residences got what it takes to maintain its dividend payments? Chartwell Retirement Residences has been growing its earnings per share nicely, although judging by the difference between its profit and cashflow payout ratios, the company might have reported some write-offs over the last year. In summary, while it has some positive characteristics, we're not inclined to race out and buy Chartwell Retirement Residences today.

If you're not too concerned about Chartwell Retirement Residences's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example, we've found 3 warning signs for Chartwell Retirement Residences (1 is potentially serious!) that deserve your attention before investing in the shares.

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.