The main benefit of dividend investing is generating passive income with minimal effort. You only need a small amount of money to start the process of transforming the seed capital into regular cash flows. The payout frequency varies depending on the dividend policy of the chosen company.
A company’s dividend policy dictates the dividend amount or yield, but most TSX dividend stocks pay quarterly. However, income-oriented investors turn to Canadian companies that pay monthly dividends. The chief benefit is faster compounding of principal through dividend reinvesting.
Extendicare (TSX:EXE), the renowned provider of care and services for seniors across Canada, belongs to the select group of monthly dividend payers. Also, at $7.49 per share, investors feast on the 6.41% dividend yield. The company has consistently paid, or hasn’t missed, a monthly dividend payment since January 2013.
All EXE shareholders of record as of February 29, 2024 received their February cash dividend on March 15, 2024.
Potential earnings
Extendicare is ideal for dividend investors desiring monthly passive income streams. An upfront investment of $4,494 or 600 shares will produce $288.07 in annual passive income, or $24.01 monthly. Since dividend stocks are eligible investments in a Tax-Free Savings Account (TFSA), the dividend income is tax-exempt if you hold the stocks in your TFSA.
Assuming you want to earn the same amount but don’t have the lump sum, set aside $374.50 monthly to purchase 50 EXE shares. Each tranche will generate $0.48 for one year ($0.04 monthly cash dividend per common share), excluding dividend reinvestment.
In 12 months, you would have spent $4,494 and accumulated 600 shares. In the ensuing year and with reinvestment of monthly dividends, the total profit from dividends is $296.68. Note, however, that you must purchase the stock before the ex-dividend date to be eligible for a dividend payment.
Business rebound
Extendicare suffered a severe business reversal during the global pandemic. Today, or three years later, operations have returned to pre-pandemic levels. The $622.9 million company reported strong financial results in Q4 2023, growth in managed services, and accelerating redevelopment.
In the three months ending December 31, 2023, revenue and net operating income (NOI) increased 12.8% and 97.3% year over year respectively to $350.2 million and $42.8 million. Notably, net earnings reached $8.6 million compared to the $1.7 million net loss in Q4 2022.
Management said the exponential jump in NOI reflects growth across all business segments. The long-term care (LTC) business segment had the most significant improvement, as evidenced by the 97.8% occupancy rate during the quarter. Moreover, its revenue for the year was $1.1 million more than in the same quarter in the prior year.
According to its President and CEO, Dr. Michael Guerriere, Extendicare is repositioning for growth and value creation. Two LTC homes under the redevelopment program have commenced construction. Extendicare will also continue establishing and leveraging partnerships with other care providers to better integrate seniors’ care with the rest of Canada’s health system.
Invest for passive income
Regular investors, including retirees, can create passive income from dividend investing. While the strategy is not risk-free, companies like Extendicare stand out for their consistent, stable dividend payments.
