A Close Look At National Health Investors' 6% Dividend: Is It Safe?

The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

National Health Investors, Inc NHI is a health care real estate investment trust (REIT) specializing in senior housing and long-term care facilities with a portfolio of 236 properties across 34 states.

The REIT’s properties are triple net leased to some of the largest and most well-established health care operators in the industry.

NHI’s Dividend History: National Health Investors has been a dependable income REIT with dividend increases every year since 2002. The dividend growth even continued through 2020 and the first half of 2021, but an increase in rent deferrals resulted in an 18% dividend cut in the third quarter. 

NHI’s Dividend Safety: While a dividend cut is always disappointing for shareholders, it’s sometimes necessary in order to preserve capital and ensure the company’s ability to maintain future dividends.

The operators that lease National Health Investors’ properties have struggled with low occupancy since the start of the COVID-19 pandemic, which has caused more rent deferrals and a dip in the REIT’s rental revenue. 

The dividend cut was definitely necessary in this case when you look at the company’s increasing FFO payout ratio. Prior to the pandemic, National Health Investors maintained an FFO payout ratio of around 75%. That ratio increased to 80.4% at the end of 2020 and almost 88% by the end of the first quarter of 2021. 

The current quarterly dividend rate of 90 cents per share brings the company’s payout ratio back down to 75.9%, which is the payout it’s proven to be able to afford while maintaining consistent growth and a healthy balance sheet. 

What Could Affect NHI’s Dividend In The Near Future: The main factor for the company’s future dividends is occupancy in its properties. While the triple net lease structure provides a fixed rental payment regardless of the number of residents in each property, the operators’ ability to cover those rent payments depends on maintaining a certain occupancy level. 

Assuming vacancy is at or near its peak, rent collection should start to improve over the next 12 months with dividend increases to follow.

Photo: In the Now Mag on Unsplash. 

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.