It has been more than a week since Senior Housing Properties Trust (SNH) and Five Star Senior Living made their announcement about a complete restructuring of the relationship. Five Star’s shares have not recovered, nor were they expected to. But for Senior Housing Properties Trust it has been down, down and down.
SNH’s shares have dropped for eight days in a row since the announcement, for a cumulative loss of 29%, so far. And the share price is down 40% from its 2019 high of $14.25. At the low end of the estimated range for the new dividend rate (55 cents to 65 cents annually), the yield would now be 6.3%. That is down from the current 18%.
But actually, a 6.3% yield may be too high for a REIT that has just dramatically changed its risk profile (negatively) with its major tenant that is suffering operationally and financially. SNH’s debt ratings are also under review. Investors may need to see how Five Star fared in the first quarter, and at least the second quarter after that to determine the sustainability of the new revenue flow. This just should have been cleaned up a year or two ago.