In This Article:
The board of NexLiving Communities Inc. (CVE:NXLV) has announced that it will pay a dividend of CA$0.01 per share on the 27th of September. The dividend yield will be 1.9% based on this payment which is still above the industry average.
Check out our latest analysis for NexLiving Communities
NexLiving Communities' Distributions May Be Difficult To Sustain
A big dividend yield for a few years doesn't mean much if it can't be sustained. NexLiving Communities is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.
Looking forward, earnings per share could rise by 29.9% over the next year if the trend from the last few years continues. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. The positive free cash flows give us some comfort, however, that the dividend could continue to be sustained.
NexLiving Communities Is Still Building Its Track Record
The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The most recent annual payment of CA$0.04 is about the same as the annual payment 4 years ago. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.
The Company Could Face Some Challenges Growing The Dividend
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that NexLiving Communities has grown earnings per share at 30% per year over the past five years. The company hasn't been turning a profit, but it running in the right direction. If the company can turn a profit relatively soon, we can see this becoming a reliable income stock.
In Summary
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for NexLiving Communities you should be aware of, and 1 of them is significant. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.