A good dividend stock for me must possess some key traits. These are an enticing investor reward policy, ideally some defensive ability, and positive future prospects to keep the dividends rolling in.
I think I’ve found one that ticks all these boxes in Assura (LSE: AGR). Here’s why I’m planning on buying some shares as soon as I have some investable cash.
Healthcare properties
Assura is set up as a real estate investment trust (REIT). In exchange for tax breaks, businesses set up like this must return 90% of profits to shareholders, hence the draw of buying such stocks for passive income purposes. I already own a few other REITs.
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The business specialises in healthcare properties such as GP surgeries and other provisions. It primarily rents its facilities to the NHS.
Assura shares are down 16% over a 12-month period from 49p at this time last year, to current levels of 41p. This is due to economic volatility, which has hurt property stocks.
Dissecting my desired traits
Firstly, due to the make up of REITs, they make good passive income stocks with an attractive investor reward policy. Plus, at present, Assura offers a dividend yield of 7.9%. This is higher than the FTSE 100 and FTSE 250 index averages. However, it’s worth noting that dividends are never guaranteed.
Next, as it provides healthcare facilities, there is a defensive aspect here, as healthcare is a basic requirement for all. Furthermore, the business could continue to do well. Renting to the government, in the form of the NHS, is shrewd. It usually involves long-term contracts, and there’s virtually zero chance of defaults.
Finally, the growing population and demand for healthcare in the UK could help support Assura’s growth as a business, as well as its level of returns.
It’s also worth noting that Assura shares look decent value for money on a price-to-earnings ratio of just 12.
Risks and my verdict
Two key risks come to mind when it comes to Assura. Firstly, continued economic turbulence could be bad news for the share price. As higher interest rates push down net asset values (NAVs), investor sentiment could continue to remain low, and hurt the stock.
Next, the NHS’s services are in high demand, but there are staffing issues for the government to address. Many healthcare professionals are either leaving the industry, or moving abroad with the aspirations of a better work/life balance and working conditions. Could Assura over-stretch itself by building new facilities, only to find the NHS doesn’t need them due to a lack of staff? This is a real possibility, in my eyes.
Overall, the bullish aspects outweigh the bearish ones by some distance for me. Assura hits all the nails on the head of what I look for, hence my bullishness on the stock, and its potential to provide me consistent returns.
