The S&P/TSX Composite Index dropped 81 points on Thursday, May 11. The only segments to finish the day in the black were financials and telecoms. Today, I want to focus on a cheap TSX stock that also offers mouth-watering income. Extendicare (TSX: EXE) is that TSX stock. This Markham-based company provides care and services for seniors across Canada. Today, I want to explore why I’m hot on the stock and on the industry that Extendicare finds itself in. Let’s dive in!
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How has this TSX stock performed over the past year?
Shares of this TSX stock have climbed 10% month over month as of close on May 11. That has pushed Extendicare into positive territory in the year-to-date period in 2023. Moreover, the stock is up 4.6% compared to the same period in 2022. Investors who want to track its performance back further can play with the interactive price chart below.
Here’s why I’m excited about Extendicare’s future…
Like many of its peers in the developed world, Canada is wrestling with an aging population. Indeed, the proportion of seniors that will make up our society is an unprecedented historical event. Elderly care services are going to feel the pressure in the years and decades to come, which will make the contribution of private companies like Extendicare crucial.
Canada’s senior population is expected to grow by 68% from 2017 through to 2037, according to a report from the Canadian Institute for Health Information (CIHI). That demographic cohort will number over 10 million by 2037. Moreover, seniors over 75 years of age will make up over 50% of the total.
Researcher Market.us recently valued the global long-term-care market at US$1.10 trillion in 2022. The report projects that this market will grow to US$2.16 trillion by 2032. That would represent a compound annual growth rate (CAGR) of 7.2% over the forecast period. Meanwhile, North America remains the most dynamic market in this arena. That is why this TSX stock commands your attention in the spring of 2023.
Extendicare: Why I’m stacking this cheap TSX stock in May 2023
Extendicare unveiled its first-quarter (Q1) fiscal 2023 earnings on May 4. The company delivered adjusted earnings before interest, taxes, depreciation, and amortization of $31.0 million — up $10.8 million compared to Q1 of fiscal 2022. Earnings were powered by a higher recovery of COVID-19 costs, increased long-term-care funding, and volume growth in home health care and managed services.
The company reported average daily volume of 26,043 in Q1 2023 — up 6.1% compared to the prior year. Meanwhile, average long-term-care occupancy jumped 60 basis points to 95.1%. Extendicare posted revenue growth of 6.2% to $324 million while adjusted funds from operations hit $20.8 million, or $0.24 per basic share — up from $12.5 million, or $0.14 per basic share, in Q1 fiscal 2022.
This TSX stock currently possesses an attractive price-to-earnings ratio of 9.2 as of close on May 11. Moreover, Extendicare offers a monster monthly dividend of $0.04 per share. That represents a 6.6% yield.
