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

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Chartwell Retirement Residences (TSE:CSH.UN) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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 June will not receive the dividend, which will be paid on the 15th of July.

The company's upcoming dividend is CA$0.051 a share, following on from the last 12 months, when the company distributed a total of CA$0.61 per share to shareholders. Based on the last year's worth of payments, Chartwell Retirement Residences has a trailing yield of 4.9% on the current stock price of CA$12.55. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. 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 typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Chartwell Retirement Residences reported a loss last year, so it's not great to see that it has continued paying a dividend. 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 61% of its free cash flow as dividends, within the usual range for most companies.

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. 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.

Remember, you can always get a snapshot of Chartwell Retirement Residences's financial health, by checking our visualisation of its financial health, here.

Final Takeaway

Is Chartwell Retirement Residences worth buying for its dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." Bottom line: Chartwell Retirement Residences has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

With that being said, if you're still considering Chartwell Retirement Residences as an investment, you'll find it beneficial to know what risks this stock is facing. For example, Chartwell Retirement Residences has 2 warning signs (and 1 which is significant) we think you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com