The S&P/TSX Composite Index didn’t finish below 19,000 from the week of April 5 to April 9, 2021. Canada’s primary stock market is up double digits (10.29%) year to date. Thus far, this year, the top-performing sector is health care with its +29.49% gain. The energy sector is second (+28.05%), while the materials sector (-0.55%) is the only sector among the 11 in negative territory.
The healthcare sector has two constituents that should attract yield-hungry investors. Both companies are in the centre of the health crisis. COVID-19 has dealt long-term-care (LTC) facilities and retirement residences a heavy blow, although modernization should be forthcoming. Dividend stocks Sienna Senior Living (TSX:SIA) and Extendicare (TSX:EXE) yield more than 6%.
Leading LTC provider
Sienna Senior Living from Markham has been providing senior living and LTC services since 1972. The $990.17 million company is among the largest for-profit, LTC providers in the country. It owns LTC facilities and retirement residences in the provinces of Ontario and British Columbia.
As of year-end 2020, Sienna owned and operated 70 seniors’ living residences and manages 13 residences for third parties. In 2020, the drop in the average occupancy rates at LTC and retirement homes resulted in a net loss of $24.4 million versus the $7.5 million net income in 2019.
Despite the dismal financial results due to the pandemic’s impact, Sienna shares are up 6.23% year to date. It maintains a solid balance sheet, and the operations are supported by government-guaranteed cash flows. The share price is $14.77, while the dividend yield is a high 6.34%.
According to Nitin Jain, Sienna’s president and CEO, the company’s development plans are progressing. Sienna’s chief medical officer, Dr. Andrea Moser, added that most of the team members, essential caregivers, and residents are fully vaccinated.
Quality healthcare provider
Extendicare outperforms the TSX with its 20.05% year-to-date gain. You can snag the healthcare stock at $7.83 per share and be paid 6.13% in dividends. Like Sienna, the $701.09 million company operates in the senior space and is based in Markham. You’d be investing in a pure-play Canadian senior care and service provider.
Since commencing operations in 1968, Extendicare is now recognized as a leading provider of quality health care across Canada. Even before the outbreak of coronavirus, the company was uniquely positioned to capitalize on industry trends. The goal is to broaden its footprint in Canada while meeting the demands of the aging population.
In 2020 (year ended December 31, 2020), Extendicare reported a 7% increase in total revenue compared with 2019. However, net operating income (NOI) fell 31%. Because of its strong liquidity position and no debt maturing until Q1 2022, Extendicare has financial flexibility. On year-end 2020, cash and cash equivalents on hand is $180.0 million, while undrawn demand credit facilities is about $71.3 million.
Pure dividend plays
The global pandemic has disproportionately affected the operations of Sienna Senior Living and Extendicare. Still, both entities have weathered the storm. Would-be investors have pure dividend plays and source of reliable income streams.
Growth could resume once the government undertakes the modernization or upgrade of the whole industry post-pandemic. The two companies are experienced operators of LTC facilities and retirement homes. Canada’s aging demographics will feed demand and lower vacancies in the coming years.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Christopher Liew has no position in any of the stocks mentioned.