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It looks like Chartwell Retirement Residences (TSE:CSH.UN) is about to go ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Chartwell Retirement Residences' shares on or after the 31st of October, you won't be eligible to receive the dividend, when it is paid on the 15th of November.
The company's next dividend payment will be CA$0.051 per share, on the back of last year when the company paid a total of CA$0.61 to shareholders. Calculating the last year's worth of payments shows that Chartwell Retirement Residences has a trailing yield of 3.9% on the current share price of CA$15.58. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Chartwell Retirement Residences
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Chartwell Retirement Residences paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Over the last year it paid out 59% 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 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.
We'd also point out that Chartwell Retirement Residences issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.