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The board of Extendicare Inc. (TSE:EXE) has announced that it will pay a dividend on the 15th of May, with investors receiving CA$0.042 per share. This means that the annual payment will be 3.6% of the current stock price, which is in line with the average for the industry.
Extendicare's Future Dividend Projections Appear Well Covered By Earnings
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Extendicare's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.
Looking forward, earnings per share could rise by 40.3% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 40% by next year, which we think can be pretty sustainable going forward.
View our latest analysis for Extendicare
Extendicare 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. The last annual payment of CA$0.48 was flat on the annual payment from10 years ago. 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.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Extendicare has seen EPS rising for the last five years, at 40% per annum. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.
Extendicare Looks Like A Great Dividend Stock
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Extendicare that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.