Extendicare (TSE:EXE) Has Announced A Dividend Of CA$0.04

Extendicare Inc. (TSE:EXE) will pay a dividend of CA$0.04 on the 15th of October. This means that the annual payment will be 5.2% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Extendicare

Extendicare's Future Dividend Projections Appear Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. The last payment was quite easily covered by earnings, but it made up 149% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

If the trend of the last few years continues, EPS will grow by 78.1% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 38% by next year, which is in a pretty sustainable range.

Extendicare Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The last annual payment of CA$0.48 was flat on the annual payment from10 years ago. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Extendicare has been growing its earnings per share at 78% a year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Extendicare could prove to be a strong dividend payer.

Our Thoughts On Extendicare's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Extendicare's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Extendicare that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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