Healthcare is the badly beaten sector (-26.3%) thus far in 2025, but surprisingly, one constituent stands out. Tax-Free Savings Account (TFSA) investors who have yet to use their $7,000 contribution limit can consider putting the entire amount into Extendicare (TSX:EXE).
The healthcare stock is up 37.8%-plus year-to-date, and its one-year price return is 102.4%-plus. Had you invested $7,000 a year ago, your money would be $14,166.67 today. Also, Extendicare is among the select Canadian domestic stocks that pay monthly dividends. At $14.45 per share, the yield is 3.5%. TFSA users earn two from this single stock in two ways: price appreciation and monthly passive income.
Safe from U.S. tariffs
Extendicare, a long-term care (LTC) services provider in Canada, is safe from or unaffected by U.S. tariffs. The $1.2 billion company provides services, not goods, and therefore is not directly subject to tariffs. The business should appeal to income-oriented investors. It’s also ideal for retirees seeking recurring income streams besides the Canada Pension Plan (CPP) and Old Age Security (OAS) benefits.
Investment takeaway
Besides LTC services, Extendicare offers home health care services like nursing care; occupational, physical, and speech therapy; and assistance with daily activities. It operates or provides contract services to over 100 LTC homes and retirement communities.
LTC accounts for 49.5% of net operating income (NOI), followed by home health care (31.2%) and managed services (19.3%). The focus on LTC redevelopment should further enhance growth in 2025. More importantly, the aging population and ever-rising demand for healthcare services are key growth drivers for the business.
Its CEO, Dr. Michael Guerriere, believes Extendicare is well-positioned to capitalize on industry trends. The ongoing concern is broadening its footprint in Canada to meet the aging population’s demands. Management also commits to expanding market presence along the continuum of care.
Financial performance
In the 12 months ending December 31, 2024, Extendicare’s revenue and net earnings increased 12.4% and 121% respectively to $1.5 billion and $75.2 million versus 2023. For the full year and Q4 2024, NOI rose 33.4% and 25.8% year-over-year to $201.5 million and $50.5 million, respectively. The average occupancy rate of LTC operations at year-end is 98%.
“Our fourth quarter and full-year results give us confidence in the potential of our business model and in the leadership team that is making that potential a reality,” Guerriere and Board Chairman Alan Torrie added. Extendicare confirms that the consolidated cash and cash equivalents on hand ($121.8 million) are sufficient to support the ongoing business operations.
According to management, dividend hikes are likely if the strong performance continues. In March 2025, Extendicare announced a 5% increase. Regarding acquisitions to achieve greater scale and synergy, management will pursue projects accretive to earnings. It will use its technology platform to leverage synergies and unlock new opportunities for organic growth.
Solid business model
Extendicare is starting the year from a position of strength and momentum. It boasts a solid business model and banks on the growing demand for healthcare services for growth. While the stock faces price volatility similar to during the 2020 global pandemic, the monthly dividend payments should be sustainable.
