Is Now the Time to Buy High-Yielding Retirement & Senior-Living Companies?

Sienna Senior Living Inc. (TSX:SIA) vs. Chartwell Retirement Residences (TSX:CSH.UN): which is the better long-term play?

| More on:

Changing demographics within Canada have continued to drive long-term, growth-oriented investors to various companies providing retirement housing for seniors. After all, the ability of such firms to benefit long term from a trend of relatively affluent seniors and families looking for retirement solutions is one which should not be ignored.

Two of the most prominent Canadian companies operating in this space are Sienna Senior Living Inc. (TSX: SIA) and Chartwell Retirement Residences (TSX: CSH.UN). These companies are two unique offerings in that Chartwell focuses on the underlying real estate related to assisted living, long-term care housing, and senior-housing communities, while Sienna offers investors increased exposure to both the underlying real estate and operations of senior facilities.

These two companies have been sought after by investors looking to cash in on a sector that is expected to outperform in the long term. Over the past two years, both Chartwell and Sienna have performed reasonably well, increasing 24% and 13%, respectively.  These two firms have also provided investors with a healthy dividend yield; currently, Chartwell and Sienna offer investors a yield of between 3.5% and 5% — not too bad for those looking for regular income and growth simultaneously.

I have commented on Chartwell’s fundamentals in the past, and although the company’s free cash flow situation appears to be improving, the company continues to trade at very elevated valuation levels. With a price-to-earnings (P/E) ratio of 112 and a price-to-sales (P/S) ratio of 4.3, investors continue to price in a great deal of growth at current levels, making this company one I would recommend caution with.

Sienna, however, provides investors with relatively similar margins and higher return on assets and return on equity numbers (3% vs. 1.8% and 7.3% vs. 3.1%, respectively), with a valuation multiple that is much more reasonable (1.7 P/S ratio). A smaller play, Sienna appears to provide a superior growth profile, as covered by its recent acquisition of 10 senior-housing assets in Ontario, well covered by fellow Fool contributor Joseph Solitro.

Bottom line

There are a variety of ways for investors to buy in to the long-term growth trends in senior living. I recommend investors dig in to the fundamentals of the companies they are interested in, with a focus on how companies such as Chartwell or Sienna perform on an operational level, as profitability and cash flow generation will remain key to how well these companies will be able to return value to shareholders over time.

Stay Foolish, my friends.

Fool contributor Chris MacDonald has no position in any stocks mentioned in this article.

More on Dividend Stocks

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

3 of the Best Canadian Stocks to Buy and Hold in a TFSA

Given their reliable business models, consistent financials, and healthy growth prospects, these three Canadian stocks are ideal additions to your…

Read more »

woman checks off all the boxes
Dividend Stocks

What Every Investor Should Know Before Buying BCE for its Dividend

BCE (TSX:BCE) stock looks like an untimely trap, but there's a strong case for buying as the firm looks to…

Read more »

senior man and woman stretch their legs on yoga mats outside
Dividend Stocks

2 TSX Dividend Stocks Retirees Can Buy and Hold for the Next Decade

These dividend stocks provide the right mix of growth, income, and stability for the long term.

Read more »

Paper Canadian currency of various denominations
Dividend Stocks

3 Stocks to Build a Strong Canadian Income Portfolio

While no dividend is guaranteed, these companies have shown their ability to generate resilient cash flows and return capital.

Read more »

stocks climbing green bull market
Dividend Stocks

2 High-Yield Dividend Stocks to Buy and Hold for a Decade of Income

With resilient business models, reliable cash flows, high yields, and healthy growth prospects, these two Canadian stocks are ideal for…

Read more »

Person holds banknotes of Canadian dollars
Dividend Stocks

I’d Put My Whole 2026 TFSA Contribution Into this 5.5% Passive-Income Payer

This passive-income payer has raised its dividend every year since 1995. Moreover, it has room to increase its dividend in…

Read more »

dividends grow over time
Dividend Stocks

$10,000 Invested at 8% for 20 Years Could Become $46,610

$10,000 doesn’t need perfect timing to become meaningful wealth — it mainly needs time and compounding.

Read more »

Partially complete jigsaw puzzle with scattered missing pieces
Dividend Stocks

How I’m Structuring My $7,000 TFSA for Steady Monthly Payouts

Learn the importance of structuring your portfolio to achieve steady payouts and minimize risk through smart diversification.

Read more »