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NexLiving Communities Inc. (CVE:NXLV) has announced that it will pay a dividend of CA$0.01 per share on the 28th of June. This means the annual payment is 2.3% of the current stock price, which is above the average for the industry.
View our latest analysis for NexLiving Communities
NexLiving Communities Might Find It Hard To Continue The Dividend
If the payments aren't sustainable, a high yield for a few years won't matter that much. Even though NexLiving Communities isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. 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 40.6% over the next year if the trend from the last few years continues. We like to see the company moving towards profitability, but this probably won't be enough for it to post positive net income this year. The healthy cash flows are definitely as good sign, though so we wouldn't panic just yet, especially with the earnings growing.
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 last annual payment of CA$0.04 was flat on the annual payment from4 years ago. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.
The Company Could Face Some Challenges Growing The Dividend
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that NexLiving Communities has been growing its earnings per share at 41% a year over the past five years. Even though the company is not profitable, it is growing at a solid clip. If this trajectory continues and the company can turn a profit soon, it could bode well for the dividend going forward.
In Summary
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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. We would be a touch cautious of relying on this stock primarily for the dividend income.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 makes us a bit uncomfortable. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.