Investing in quality dividend stocks is a strategy that helps you benefit from steady passive income and long-term capital gains. While several TSX stocks offer you a dividend, just a handful of these companies are poised to deliver market-beating gains.
One such monthly dividend stock is Extendicare (TSX:EXE). Valued at a market cap of $1.18 billion, the TSX dividend stock has risen over 90% over the past year. Despite its outsized returns, it offers you a tasty dividend yield of 3.4%. However, it trades almost 25% below all-time highs, allowing you to buy the dip.
Extendicare provides care and services for seniors in Canada. It offers long-term-care services and home healthcare services, such as nursing care and occupational, physical, and speech therapy. It operates through the Extendicare, ParaMed, Extendicare Assist, and SGP Purchasing Partner Network brands.
Is the TSX dividend stock a good buy?
Extendicare delivered robust first-quarter results with revenue and earnings growth across all business segments, driven by demographic trends and strategic execution in Canada’s aging healthcare market.
The long-term care operator reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $35.6 million, up 18.2% year over year. Excluding out-of-period items, EBITDA surged 42.7% to $29 million, with NOI (net operating income) and margin improvements in all three business segments.
Home healthcare operations saw its average daily volumes rise by 8.9% from the prior year. After adjusting for retroactive funding items, NOI margins improved by 200 basis points due to rate increases and operational leverage from the company’s scalable back-office infrastructure.
After adjustments, long-term care segment margins expanded 150 basis points year over year, driven by increased government funding, improved occupancy rates, and reduced operating costs.
The managed services division grew revenue and NOI, mainly from three new facilities in the Axium joint venture and organic growth in beds serviced through the purchasing network, which now covers over 148,000 beds.
The strong performance prompted the board to approve a 5% monthly dividend increase to $0.042 per share, reflecting confidence in the sustainability of the capital-light business model.
Extendicare announced plans to acquire Closing the Gap Healthcare for approximately $75.5 million, adding $84.2 million in annual revenue to its home healthcare operations. The transaction includes an earnout tied to new business growth and is expected to be earnings accretive, adding roughly $0.06 to annual funds from operations per share based on 2024 performance.
Extendicare completed the sale of three long-term-care redevelopment projects to the Axium joint venture for $56.3 million, generating an estimated $11.1 million after-tax gain. This capital recycling strategy supports ongoing redevelopment programs while maintaining managed interests in the facilities.
With six homes under construction and a strong liquidity position, Extendicare remains well-positioned to capitalize on Canada’s demographic shift toward an aging population.
Is the TSX stock undervalued?
Analysts tracking Extendicare expect its revenue to increase from $1.46 billion in 2024 to $1.75 billion in 2028. Comparatively, adjusted earnings are forecast to expand from $0.86 per share in 2024 to $1.12 per share in 2028.
Today, Extendicare stock trades at 16 times forward earnings, which is lower than its 10-year average multiple of 24.9 times. If the TSX stock is priced at 18 times forward earnings, it will trade around $20 in May 2028, indicating an upside potential of 41% from current levels. If we adjust for dividends, cumulative returns could be closer to 52%.
