Monthly Dividend Stock In Focus: Extendicare

Updated on April 1st, 2025 by Felix Martinez

Extendicare (EXETF) has two appealing investment characteristics:

#1: It is a high-yield stock based on its 3.9% dividend yield.
Related: List of 5%+ yielding stocks.
#2: It pays dividends monthly instead of quarterly.
Related: List of monthly dividend stocks

You can download our full Excel spreadsheet of all 76 monthly dividend stocks (along with metrics that matter, like dividend yield and payout ratio) by clicking on the link below:

A high dividend yield and a monthly dividend make Extendicare appealing to income-oriented investors. The company is also ideally positioned to benefit from the secular growth of demand for healthcare services. In this article, we will discuss Extendicare’s prospects.

Business Overview

Through its subsidiaries, Extendicare provides care and services for seniors in Canada. The company offers long-term care (LTC) services; home health care services, such as nursing care, occupational, physical, and speech therapy, assistance with daily activities, and contract and consulting services to third parties. It operates LTC homes, retirement communities, and home healthcare operations under the Extendicare, ParaMed, Extendicare Assist, and SGP Partner Network brands. The company was incorporated in 1968 and is based in Markham, Canada.

Extendicare operates or provides contract services to a network of 103 long-term care homes and retirement communities, providing approximately 11 million hours of home health care services annually.

Source: Investor Presentation

Extendicare has been hurt by the coronavirus crisis, which has caused many problems in the company’s daily operations. COVID-19, influenza, and other viruses have resulted in abnormally high employee absenteeism, thus exacerbating an already tight labor market. As a result, Extendicare has seen its operating costs increase significantly since the onset of the coronavirus crisis.

Growth Prospects

Extendicare is ideally positioned to benefit from a strong secular trend, namely the growing demand for healthcare services. The demand for health care from seniors who are above 85 years old is growing at a 4% average annual rate.

Source: Investor Presentation

Moreover, there is an immense backlog of demand for long-term care beds, with more than 48,000 seniors waiting for a bed in Ontario alone. According to official estimates, there will be a need for more than 200,000 new long-term care beds in Canada by 2035. Thanks to its 55 years of experience in this business, Extendicare is ideally poised to benefit from the secular growth in the demand for health care services.

On the other hand, investors should be aware that Extendicare has exhibited a volatile performance record. Due to the aforementioned impact of the pandemic on its business, the company has not grown its earnings per share over the last decade. Therefore, the stock is suitable only for patient investors, who can endure extended periods of poor business performance and stock price volatility and remain focused in the long run. Given the low comparison base formed this year, we expect the company to grow its earnings per share by about 5.0% per year on average over the next five years.

Dividend & Valuation Analysis

Extendicare currently offers a 3.9% dividend yield. It is thus an interesting candidate for income-oriented investors, but the latter should be aware that the dividend may fluctuate significantly over time due to the fluctuation of the exchange rates between the Canadian dollar and the USD.

The company has a decent payout ratio of 68%. To cut a long story short, the 3.9% dividend will not likely be cut soon, but given the company’s material interest expense, it is not entirely safe in the long run.

Regarding the valuation, Extendicare is trading for 12.9 times its earnings per share in the last 12 months. We assume a fair price-to-earnings ratio of 10.0 for the stock. Therefore, the current earnings multiple is higher than our assumed fair price-to-earnings ratio. If the stock trades at its fair valuation level in five years, it will have a -2.2 % annualized compression for the next five years.

Taking into account the 5% annual growth of earnings per share, the 3.9% dividend, and a -3.5% annualized compression of valuation level, Extendicare could offer a 5.4% average annual total return over the next five years. This is certainly a fair expected return. Nevertheless, the stock is suitable only for patient investors who are comfortable with Extendicare’s volatile business performance and stock price.

Final Thoughts

Extendicare has a solid business model and greatly benefits from the growing demand for healthcare services. The stock offers an attractive dividend yield of 3.9% with a healthy payout ratio of 68%, making it an attractive candidate for income-oriented investors’ portfolios. The stock has an expected return of 5.4% per year over the next five years.

On the other hand, investors should be aware of the risk resulting from the company’s somewhat weak balance sheet and its choppy business performance. Therefore, the stock is suitable only for patient investors, who can ignore stock price volatility and remain focused in the long run.

Moreover, Extendicare is characterized by exceptionally low trading volume. This means that it is hard to establish or sell a large position in this stock.

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