Why Extendicare (TSE:EXE) Remains a High-Conviction Buy in 2026

In the ever-evolving healthcare sector, Extendicare (TSE:EXE) has emerged as a standout performer, combining robust earnings growth, a resilient dividend strategy, and strong analyst backing to position itself as a high-conviction buy for 2026. With a five-year share price surge of 247% and a recent 45% rally in the last three months, the company's trajectory reflects a compelling blend of operational execution and strategic foresight.

Earnings Growth: A Catalyst for Long-Term Value

Extendicare's financial performance in 2025 underscores its ability to deliver consistent top- and bottom-line growth. For the full year 2024, the company reported a staggering 121.32% year-over-year earnings increase, transitioning from a $51 million loss in 2023 to $75.21 million in profit. This momentum continued into 2025, with Q3 revenue rising 22.6% to $440.3 million, driven by organic growth in home care volumes and strategic acquisitions. Adjusted EBITDA surged 36.6% to $46.9 million during the same period, outpacing the Healthcare industry's average annual earnings growth of 23.5%.

The company's earnings power is further bolstered by its aggressive expansion strategy. In early 2025, Extendicare acquired CBI Home Health for $570 million, a move that diversified its service offerings and expanded its footprint in high-growth home care markets. With additional acquisitions like Closing the Gap, the company is well-positioned to capitalize on the growing demand for post-acute care services, a trend expected to accelerate in 2026.

Dividend Sustainability: Rewarding Shareholders with Confidence

For income-focused investors, Extendicare's dividend history is a testament to its financial discipline. The company maintains a monthly payout structure, with dividends increasing from $0.040 per share in 2023–2024 to $0.042 in 2025. This 5% increase reflects management's confidence in cash flow sustainability, particularly as adjusted funds from operations (AFFO) per share rose 19.3% to $0.31 in Q3 2025.

The dividend's sustainability is further supported by Extendicare's improving profitability. With a five-year compound annual growth rate (CAGR) of 110% in earnings per share, the company has more than enough margin to maintain-and potentially grow-its payout. Analysts have noted that the dividend's yield, combined with the stock's strong earnings trajectory, makes it an attractive option for long-term investors seeking both income and capital appreciation.

Analyst Sentiment: A Consensus of Confidence

Recent analyst activity highlights a strong consensus of optimism around Extendicare's prospects. In the October–December 2025 quarter, the stock received three "strong buy" and four "buy" ratings, with price targets collectively signaling upside potential. National Bank upgraded its target to C$24.50 from C$21.50, while Canaccord raised its target to C$22.50 from C$20, both citing the company's strategic acquisitions and earnings momentum. RBC Capital and BMO Capital further reinforced this sentiment with "Outperform" ratings, underscoring confidence in Extendicare's ability to outpace sector peers.

This analyst support is not isolated. The company's insider buying activity in Q4 2025 and its plans to expand long-term care facilities have added to the narrative of a management team committed to unlocking shareholder value. With the next earnings report scheduled for February 25, 2026, investors will have further data to validate these bullish expectations.

Conclusion: A Triple-Threaded Investment Case

Extendicare's combination of earnings growth, dividend sustainability, and favorable analyst sentiment creates a rare trifecta for long-term investors. The company's ability to transform from a loss-making entity to a high-growth healthcare provider, coupled with its disciplined capital allocation and strategic acquisitions, positions it as a compelling buy in 2026. As the healthcare sector continues to evolve, Extendicare's proactive approach to innovation and expansion ensures it remains a key player in a market ripe for sustained value creation.