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

Chartwell Retirement Residences' (TSE:CSH.UN) investors are due to receive a payment of CA$0.051 per share on 15th of May. This payment means that the dividend yield will be 4.9%, which is around the industry average.

View our latest analysis for Chartwell Retirement Residences

Chartwell Retirement Residences Is Paying Out More Than It Is Earning

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Chartwell Retirement Residences is not generating a profit, and despite this is paying out most of its free cash flow as a dividend. Generally it is unsustainable for a company to be paying a dividend while unprofitable, and with limited reinvestment into the business growth may be slow.

Earnings per share is forecast to rise by 145.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could get very high, which probably can't continue without starting to put some pressure on the balance sheet.

Chartwell Retirement Residences Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. 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.

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. Earnings per share has been sinking by 27% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

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. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would probably look elsewhere for an income investment.

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. For instance, we've picked out 2 warning signs for Chartwell Retirement Residences that investors should take into consideration. 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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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.