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

By
Simply Wall St
Published
April 22, 2022
TSX:CSH.UN
Source: Shutterstock

Chartwell Retirement Residences' (TSE:CSH.UN) investors are due to receive a payment of CA$0.051 per share on 16th of May. This means the annual payment is 4.7% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Chartwell Retirement Residences

Chartwell Retirement Residences Is Paying Out More Than It Is Earning

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, the dividend made up 92% of cash flows, but a higher proportion of net income. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.

Looking forward, EPS could fall by 36.7% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 2,295%, which could put the dividend under pressure if earnings don't start to improve.

historic-dividend
TSX:CSH.UN Historic Dividend April 22nd 2022

Chartwell Retirement Residences Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the dividend has gone from CA$0.54 to CA$0.61. This means that it has been growing its distributions at 1.3% per annum over that time. 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.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Chartwell Retirement Residences' EPS has declined at around 37% a year. 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

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. Although they have been consistent in the past, we think the payments are a little high to be sustained. We don't think Chartwell Retirement Residences is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 4 warning signs for Chartwell Retirement Residences (of which 2 don't sit too well with us!) 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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