A gentle and dependable passive-income stream: it’s the dream that many people try for. It guarantees worry-free nights, monetary flexibility, and a lifetime of monetary safety. Dividend shares can assist us obtain this dream. However with so many to select from, it could appear daunting.

However let’s get began by contemplating Chartwell Retirement Residences REIT (TSX:CSH.UN), Canada’s largest supplier and proprietor of seniors housing communities from unbiased dwelling to long-term care.

After the pandemic: A 6.45% dividend yield rooted in robust secular tendencies

Retirement houses and senior dwelling settings have come beneath intense stress within the final three years. This resulted in considerably decrease occupancy charges and money flows in addition to large staffing shortages. It additionally resulted in a 32% decline in Chartwell’s inventory worth over the past three years.

But regardless of all of this turmoil, the dividend has remained intact. This demonstrates administration’s dedication to it, in addition to their perception that the enterprise will rebound because the pandemic resolves. And that is what’s, actually, taking place. After falling sharply in 2021 and 2022, income and earnings are heading sequentially larger.

Let’s take the newest reported quarter, the third quarter (Q3) of 2022. Whereas income declined sharply versus the identical quarter final yr, occupancy is rising. In reality, it rose 60 foundation factors within the quarter, with one other 40-basis-point improve in October. This interprets into an occupancy price of 77.7% in September and 78.1% in October. Whereas it is a far cry from charges of above 90% earlier than the pandemic, the purpose right here is that it’s on the right track.

The constructive long-term secular tendencies stay, as the largest demographic development at work right this moment is the growing older inhabitants. Regardless of covid-related challenges, demand for retirement dwelling and senior care are poised to proceed to rise over the following a few years.

Passive earnings: Sustainability of the dividend

The query of dividend sustainability is prime of thoughts as of late, particularly for an organization like Chartwell. I imply, it is a capital-intensive enterprise — one which’s been financed in a giant approach by means of debt. Now that rates of interest are larger and heading even larger, what affect will this have on Chartwell’s financials?

As of the top of final quarter, Chartwell was in a suitable liquidity place of $182 million, together with $25 million in money and money equivalents. Additionally, mortgage maturities are staggered over a median of 6.2 years. The corporate’s dividend is nicely above 100% of earnings, however its money circulate covers it — it’s not excellent however acceptable for now, for my part.  

Rising rates of interest are a damaging for Chartwell, as there’s a closely reliance on debt. However by the identical token, larger charges will imply larger curiosity earnings for seniors. This may translate into higher affordability for seniors trying right into a retirement residence.

Robust outlook for CSH.UN

Pandemic issues however, Chartwell Retirement Residences are assembly a transparent want for the Canadian inhabitants. Individuals need assistance and care, as they head into their senior years, and Chartwell is an efficient possibility to supply this.

Going ahead, Chartwell’s priorities are to extend occupancy in its residences and to resolve the staffing disaster. Administration is deploying many sources to attain these targets, and so they anticipate to see the fruits of this labour within the subsequent couple of years.

Within the meantime, traders who’re in search of passive dividend earnings ought to take into account this 6.45%-yielding dividend inventory, CSH.UN.