Dividend Investors: Don't Be Too Quick To Buy Chartwell Retirement Residences (TSE:CSH.UN) For Its Upcoming Dividend

Chartwell Retirement Residences (TSE:CSH.UN) stock is about to trade ex-dividend in 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Chartwell Retirement Residences investors that purchase the stock on or after the 28th of October will not receive the dividend, which will be paid on the 15th of November.

The company's next dividend payment will be CA$0.051 per share. Last year, in total, the company distributed CA$0.61 to shareholders. Calculating the last year's worth of payments shows that Chartwell Retirement Residences has a trailing yield of 5.0% on the current share price of CA$12.35. If you buy this business for its dividend, you should have an idea of whether Chartwell Retirement Residences's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Chartwell Retirement Residences

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Chartwell Retirement Residences reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Chartwell Retirement Residences didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Over the last year, it paid out more than three-quarters (76%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Chartwell Retirement Residences reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Chartwell Retirement Residences has delivered an average of 1.3% per year annual increase in its dividend, based on the past 10 years of dividend payments.

We update our analysis on Chartwell Retirement Residences every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Is Chartwell Retirement Residences worth buying for its dividend? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

So if you're still interested in Chartwell Retirement Residences despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Our analysis shows 3 warning signs for Chartwell Retirement Residences that we strongly recommend you have a look at before investing in the company.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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.

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