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Neighborhood Healthcare Belief (NYSE: CHCT) has a outstanding dividend-raising monitor file. The corporate has boosted its dividend each quarter because it started paying one in 2015. The payout has been raised for 41 consecutive quarters.
The will increase aren’t massive – 1 / 4 of a penny every time. Whereas they’ve contributed to the present 13% annual yield, the massive cause the inventory has such a excessive yield is that the share worth has fallen by two-thirds over the previous three years.
Neighborhood Healthcare Belief owns 200 properties in 36 states which are leased to medical doctors, hospitals, and different healthcare organizations.
This can be a small cap firm that generates a bit over $100 million in income per yr. Regardless of the weak inventory worth, the corporate is worthwhile and money circulate optimistic.
Let’s see whether or not its money circulate is sufficient to maintain additional quarterly raises.
As a result of Neighborhood Healthcare Belief is an actual property funding belief, we use a measure of money circulate known as funds from operations, or FFO.
Final yr, FFO climbed 7% to $51.2 million. This yr, it’s forecast to slide barely to $50.9 million. That projected slight discount in FFO is sufficient to earn Neighborhood Healthcare a penalty on its Security Internet score.
Unfavorable money circulate development is a giant pink flag.
For the reason that distinction between final yr’s complete and the present estimate for this yr is so small, it’s attainable the corporate experiences optimistic FFO development as an alternative of barely damaging. If that happens, Neighborhood Healthcare will earn an improve to its Security Internet score.
One other space of concern is the payout ratio. Once more, the distinction between a penalty and no penalty may be very small.
Final yr, Neighborhood Healthcare paid shareholders $51.7 million in dividends in opposition to $51.2 million in FFO, so it paid extra in dividends than it took in (however barely). This yr, the hole is anticipated to widen a bit – to $53.5 million in dividends paid in opposition to $50.9 million in FFO.
That might push the payout ratio up from 101% to 105%, nonetheless simply above my 100% threshold for REITs.
Over the primary three quarters of 2025, FFO has totaled simply $32.6 million, so the corporate would want a giant fourth quarter to eclipse the present full-year estimate and canopy the dividend.
As you possibly can see, this can be a dividend story with some issues. FFO has been declining, it’s projected to say no once more this yr, and the corporate pays out extra in dividends than it takes in.
Although it solely must beat FFO expectations by $300,000, that doesn’t appear probably on condition that FFO over the primary 9 months is fairly far-off from that quantity and rental actual property is a considerably predictable enterprise because of rents being locked in.
On the plus facet, the corporate has a stellar monitor file of quarterly dividend will increase, and I anticipate administration to do every part of their energy to maintain that 41-quarter streak alive.
I don’t anticipate an imminent dividend reduce, and if FFO improves, the corporate’s dividend security score may even obtain an improve or two. But when FFO doesn’t enhance, administration may have some powerful choices to make.
Dividend Score Security: D
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