In this article, I discuss two dividend stocks that offer their shareholders reliable and sustainable dividend income.
Chartwell Pension REIT
As the owner and operator of a series of senior living communities, Chartwell Retirement Homes (TSX:CSH.UN) is well positioned to continue providing dividend income to its shareholders. Canada’s population is aging. In fact, about 20% of the population is over 65 years old. And this number is expected to increase steadily in the coming years.
This has translated into strong demand for senior housing, something that Chartwell has benefited from. In Chartwell’s third quarter, revenue rose 28% to $282 million. Funds from operations also increased 30.8% to $73.1 million and net operating income increased 15.8%.
This is due to the strong occupancy rate, which is fueled by a very favorable supply/demand environment. Simply put, demand is very strong and supply is limited. To maintain a healthy balance between supply and demand over the next decade, the industry would need to build 200,000 suites, which is almost ten times the number built in the past decade.
So we can see that Chartwell is currently operating in a very favorable environment and that this environment is likely to continue for several years to come. And in response to the strong cash flows the company generates, Chartwell’s dividend is likely to be increased in the very near future.
Chartwell currently yields just over 3%.
Tourmaline
As one of Canada’s largest natural gas producers, Tourmaline Oil Corp. (TSX:TOU) is also very well positioned as a top dividend stock. Just as Chartwell is benefiting from some very positive fundamentals in its sector, so too is Tourmaline.
The North American natural gas industry is also looking forward to very strong demand. This comes from a variety of sources, all of which have a very long growth history behind them – for example strong growth in demand for liquefied natural gas or LNG. This has already happened, but even more so in the US. With LNG Canada’s recent ramp-up, Canadian natural gas producers will see a big change in demand. This increase in demand will increase prices and volumes for producers such as Tourmalijn.
Tourmaline reported lower cash flow in the latest quarter, down 3% to $719.6 million. This was due to weak natural gas prices in Canada. In the third quarter, prices were even at their lowest level in more than thirty years. Yet Tourmalijn was still able to generate significant cash flows.
I expect the coming quarters and years to see stronger natural gas prices along with robust activity. This will translate into stronger cash flows for Tourmaline and more dividends for its shareholders.
Tourmaline currently yields 3.1%.
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