One of the shares I have been eyeing for my portfolio over the past few months is healthcare landlord Assura (LSE: AGR). Its shares have fallen in the past year by 16%. Not only does that mean that I can now buy them more cheaply, it has also pushed up the dividend yield to a tasty 5.5%. That compares favourably to many other FTSE 250 shares.
With a proven business model and a history of annual dividend increases, I think the shares are now attractively priced. If I had spare money to invest in shares today with the objective of boosting my income streams, Assura is one of the companies I would buy.
Straightforward business model
I think the nature of the company’s business makes it fairly easy to understand. Assura owns property that it then rents out.
Specifically, its tenants are healthcare providers, such as ambulance depots and GP surgeries.
What attracts me about this is the tenant profile. I expect healthcare demand to remain high. Healthcare providers will need property in which to base themselves, often for many years. Rent default is a risk for any landlord. But I think medical professionals such as a local doctors’ surgery are hopefully a pretty reliable choice when it comes to paying in full and on time.
The business currently has an annualised rent roll of £142m and pre-tax profit last year grew 44% to £156m.
But the FTSE 250 landlord is not resting on its laurels. It already has more than 600 properties and currently has 11 developments ongoing, with another 10 in its pipeline.
With its property portfolio generating healthy profits, Assura pays a quarterly dividend. The firm has grown this in each of the past nine years. If the business continues to perform strongly, I expect the dividend to keep rising. However, payouts are never guaranteed. A change in the business environment or dividend strategy could lead to a reduction.
Falling share price
While I see Assura as an attractive option for my portfolio, not all investors seem to be impressed.
The company’s declining share price over the past 12 months gives me pause for thought as an investor. I have been trying to understand factors that might negatively affect its valuation.
One concern is that the company ended last year with net debt of £1.1bn. That is sizeable for a firm with a market capitalisation of £1.7bn. If interest rates remain elevated in coming years, that could hurt profitability at Assura.
I’d still buy
Despite the risks, I would happily purchase this share for my portfolio today if I had spare cash to invest.
I like its business model. Demand for healthcare properties is resilient and likely to grow over time. Assura is a well-established operator with a proven business model. The dividend yield is attractive and I see ongoing room for growth if the business remains sufficiently profitable.