NexLiving Communities (CVE:NXLV) Is Paying Out A Larger Dividend Than Last Year

The board of NexLiving Communities Inc. (CVE:NXLV) has announced that it will be paying its dividend of CA$0.01 on the 29th of September, an increased payment from last year's comparable dividend. This will take the annual payment to 1.9% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for NexLiving Communities

NexLiving Communities' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, NexLiving Communities was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 2.8% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 2.3%, which we are pretty comfortable with and we think is feasible on an earnings basis.

NexLiving Communities Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The most recent annual payment of CA$0.04 is about the same as the annual payment 3 years ago. NexLiving Communities hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

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 NexLiving Communities has been growing its earnings per share at 59% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

An additional note is that the company has been raising capital by issuing stock equal to 22% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

We Really Like NexLiving Communities' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

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. Just as an example, we've come across 6 warning signs for NexLiving Communities you should be aware of, and 2 of them can't be ignored. Is NexLiving Communities not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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