With a strong position in a growing business, this Canadian stock aims to sustain a dividend yielding 6.4%.
Its senior-care and retirement residences continue to generate steady income; cash flow rose by 15.6% in the most recent quarter. The company is adding to its private-pay retirement residences, which helps to offset the uneven nature of regulations for nursing care facilities, which vary from province to province and can change frequently. In the meantime, the shares trade at a low 11.6 times projected cash flow for 2018.
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EXTENDICARE INC. (symbol EXE on Toronto; www.extendicare.com) owns 66 senior-care facilities, which can house 8,813 residents on either a long- or short-term basis. It manages another 53 residences that are home to 6,632 seniors.
Extendicare also operates 35 ParaMed Home Health Care branches in six provinces. ParaMed provides nursing care and other forms of assistance to clients who remain in their own homes.
In the three months ended March 31, 2018, the company’s revenue rose 1.0%, to $271.4 million from $268.9 million a year earlier. Cash flow rose 15.6%, to $14.7 million, or $0.17 a share, from $12.7 million, or $0.14.
Provinces regulate nursing homes in Canada, and they provide substantial funding. Both of these are subject to extensive and frequently changing standards. But to offset that, Extendicare continues to expand its private-pay retirement segment. It operates under the company’s Esprit Lifestyle Communities brand.
Dividend Stocks: Two new private retirement communities are under construction
In April 2018, Extendicare completed the acquisition of the Lynde Creek Retirement Community in Whitby, Ontario. It paid the seller, the Canadian Baptists of Ontario and Quebec Foundation, $34.5 million. The community includes the Lynde Creek Manor Retirement Residence. This is a modern private-pay luxury facility; it’s also currently 100% occupied, with a strong waiting list.
With this purchase, Esprit now owns and operates nine retirement communities with 769 suites. It has another two new communities under construction, plus it’s now expanding an existing community. Together, that represents an additional 283 suites.
Like most home-care providers, Extendicare’s ParaMed business continues to deal with a shortage of personal support workers (PSWs) and, to a lesser extent, nurses.
However, Extendicare’s cash flow is steady, and it’s in a growing business. The stock trades at just 11.6 times the company’s forecast 2018 cash flow of $0.64 a share.
The company pays a monthly distribution of $0.04 a share for an annual rate of $0.48. That makes for a high yield of 6.4%.
Recommendation in TSI Dividend Advisor: Extendicare is a buy.
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