Healthpeak Properties (NYSE: PEAK) is a healthcare actual property funding belief (REIT) with over $20 billion value of actual property. Properties embrace an outpatient facility in Poway, California; Lone Peak Hospital in Salt Lake Metropolis; and a medical park in Pensacola, Florida.
The corporate has been publicly traded for 38 years.
Healthpeak Properties yields 5.9%. However can buyers depend on the $0.30 per share quarterly dividend?
Let’s discover out…
Since Healthpeak Properties is a REIT, we use funds from operations (FFO) to find out whether or not the corporate can fund its dividend.
After a drop from $700 million to $611 million in 2021, FFO jumped final yr and is forecast to develop once more in 2023.
Final yr, Healthpeak Properties generated $905 million in FFO whereas paying out $648 million in dividends for a payout ratio of 72%. I’m snug with REITs paying out as a lot as 100% of their FFO since, by legislation, they have to pay shareholders 90% or extra of their earnings.
Take into accout, earnings are totally different from FFO, however as a result of REITs pay out such a excessive proportion of their earnings, in addition they are inclined to pay out most of their FFO in dividends.
This yr, Healthpeak Properties’ FFO is forecast to be $957 million whereas dividends paid is anticipated to extend barely to $657 million for a payout ratio of 69%.
So the corporate can simply afford its dividend.
That mentioned, right here’s the issue…
Healthpeak Properties has reduce its dividend a number of instances within the latest previous. As we speak, the dividend is almost half of what it was in 2015.
Chopping a dividend will routinely end in a downgrade. As soon as administration is snug taking away the punch bowl from buyers (or not less than diluting it), will probably be apt to do it once more when instances get robust.
At this second, Healthpeak Properties can afford its dividend. Ought to issues get tough, buyers shouldn’t be in any respect stunned if administration slashes the dividend once more.
Dividend Security Score: C
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