NexLiving Communities Inc.( CVE:NXLV ) stock is about to trade ex-dividend in four 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase NexLiving Communities' shares before the 5th of September in order to receive the dividend, which the company will pay on the 26th of September.
The company's next dividend payment will be CA$0.01 per share, on the back of last year when the company paid a total of CA$0.04 to shareholders. Looking at the last 12 months of distributions, NexLiving Communities has a trailing yield of approximately 2.2% on its current stock price of CA$1.80. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. NexLiving Communities paid out just 6.3% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether NexLiving Communities generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 9.0% of its cash flow last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Check out our latest analysis for NexLiving Communities
Click here to see how much of its profit NexLiving Communities paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see NexLiving Communities earnings per share are up 4.9% per annum over the last five years. NexLiving Communities is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. NexLiving Communities's dividend payments are broadly unchanged compared to where they were five years ago.
Final Takeaway
Is NexLiving Communities an attractive dividend stock, or better left on the shelf? Earnings per share growth has been growing somewhat, and NexLiving Communities is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but NexLiving Communities is being conservative with its dividend payouts and could still perform reasonably over the long run. NexLiving Communities looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
In light of that, while NexLiving Communities has an appealing dividend, it's worth knowing the risks involved with this stock. Be aware that NexLiving Communities is showing 4 warning signs in our investment analysis , and 2 of those are concerning...
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.
