Even though National Health Investors didn’t have to cut its dividend, management made the prudent decision to reduce its quarterly dividend by 18% to 90 cents a share. The yield had been at the high end of its peers at 6.6%, and now it will be 5.4%. Even though at least one analyst last week came forward saying he didn’t think a cut would be made, the market shrugged off the news, with NHI shares dropping just 1.26%. Perhaps they should have gone bigger.
Coincident with the dividend announcement, NHI also announced one of its major tenants, Holiday Retirement Corporation, was going to defer $600,000 in monthly rent for May through July. NHI will take that deferred rent out of Holiday’s security deposit, which was a healthy $10.6 million before the withdrawals begin. The deferred rent will earn NHI 8% in interest, and Holiday will pay the $1.7 million of remaining monthly rent due in cash. Holiday will begin to repay the deferred rent in January 2022, with payments made over 18 months.
NHI is not the only healthcare REIT to cuts its dividend. Last year, Sabra Health Care REIT, Welltower, Ventas, New Senior Investment and Diversified Healthcare Trust all took the plunge, with Diversified making the largest cut, all the way to one penny a quarter. The others could have, and maybe should have, to take advantage of the pandemic panic, especially a year ago when their share prices plunged, and in-place yields soared. But they did not know how it was all going to play out, and whether it would be a short-lived industry problem or not. We now know the answer to that.
