Monthly Dividend Stock In Focus: Extendicare

Up to date on April 1st, 2025 by Felix Martinez

Extendicare (EXETF) has two interesting funding traits:

#1: It’s a high-yield inventory based mostly on its 3.9% dividend yield.
Associated: Listing of 5%+ yielding shares.
#2: It pays dividends month-to-month as a substitute of quarterly.
Associated: Listing of month-to-month dividend shares

You possibly can obtain our full Excel spreadsheet of all 76 month-to-month dividend shares (together with metrics that matter, like dividend yield and payout ratio) by clicking on the hyperlink under:

A excessive dividend yield and a month-to-month dividend make Extendicare interesting to income-oriented traders. The corporate can also be ideally positioned to learn from the secular development of demand for healthcare companies. On this article, we are going to talk about Extendicare’s prospects.

Enterprise Overview

By means of its subsidiaries, Extendicare offers care and companies for seniors in Canada. The corporate gives long-term care (LTC) companies; house well being care companies, corresponding to nursing care, occupational, bodily, and speech remedy, help with every day actions, and contract and consulting companies to 3rd events. It operates LTC houses, retirement communities, and residential healthcare operations underneath the Extendicare, ParaMed, Extendicare Help, and SGP Companion Community manufacturers. The corporate was included in 1968 and relies in Markham, Canada.

Extendicare operates or offers contract companies to a community of 103 long-term care houses and retirement communities, offering roughly 11 million hours of house well being care companies yearly.

Supply: Investor Presentation

Extendicare has been damage by the coronavirus disaster, which has brought on many issues within the firm’s every day operations. COVID-19, influenza, and different viruses have resulted in abnormally excessive worker absenteeism, thus exacerbating an already tight labor market. In consequence, Extendicare has seen its working prices improve considerably because the onset of the coronavirus disaster.

Progress Prospects

Extendicare is ideally positioned to learn from a powerful secular pattern, specifically the rising demand for healthcare companies. The demand for well being care from seniors who’re above 85 years outdated is rising at a 4% common annual price.

Supply: Investor Presentation

Furthermore, there’s an immense backlog of demand for long-term care beds, with greater than 48,000 seniors ready for a mattress in Ontario alone. Based on official estimates, there will probably be a necessity for greater than 200,000 new long-term care beds in Canada by 2035. Because of its 55 years of expertise on this enterprise, Extendicare is ideally poised to learn from the secular development within the demand for well being care companies.

Then again, traders ought to be conscious that Extendicare has exhibited a unstable efficiency file. Because of the aforementioned affect of the pandemic on its enterprise, the corporate has not grown its earnings per share over the past decade. Subsequently, the inventory is appropriate just for affected person traders, who can endure prolonged intervals of poor enterprise efficiency and inventory value volatility and stay centered in the long term. Given the low comparability base fashioned this yr, we anticipate the corporate to develop its earnings per share by about 5.0% per yr on common over the subsequent 5 years.

Dividend & Valuation Evaluation

Extendicare presently gives a 3.9% dividend yield. It’s thus an fascinating candidate for income-oriented traders, however the latter ought to be conscious that the dividend could fluctuate considerably over time because of the fluctuation of the change charges between the Canadian greenback and the USD.

The corporate has a good payout ratio of 68%. To chop an extended story quick, the three.9% dividend won’t possible be lower quickly, however given the corporate’s materials curiosity expense, it’s not fully secure in the long term.

Relating to the valuation, Extendicare is buying and selling for 12.9 instances its earnings per share within the final 12 months. We assume a good price-to-earnings ratio of 10.0 for the inventory. Subsequently, the present earnings a number of is greater than our assumed truthful price-to-earnings ratio. If the inventory trades at its truthful valuation degree in 5 years, it would have a -2.2 % annualized compression for the subsequent 5 years.

Bearing in mind the 5% annual development of earnings per share, the three.9% dividend, and a -3.5% annualized compression of valuation degree, Extendicare may supply a 5.4% common annual complete return over the subsequent 5 years. That is definitely a good anticipated return. However, the inventory is appropriate just for affected person traders who’re comfy with Extendicare’s unstable enterprise efficiency and inventory value.

Ultimate Ideas

Extendicare has a stable enterprise mannequin and drastically advantages from the rising demand for healthcare companies. The inventory gives a beautiful dividend yield of three.9% with a wholesome payout ratio of 68%, making it a beautiful candidate for income-oriented traders’ portfolios. The inventory has an anticipated return of 5.4% per yr over the subsequent 5 years.

Then again, traders ought to pay attention to the chance ensuing from the corporate’s considerably weak steadiness sheet and its uneven enterprise efficiency. Subsequently, the inventory is appropriate just for affected person traders, who can ignore inventory value volatility and stay centered in the long term.

Furthermore, Extendicare is characterised by exceptionally low buying and selling quantity. Because of this it’s exhausting to determine or promote a big place on this inventory.

Don’t miss the sources under for extra month-to-month dividend inventory investing analysis.

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