RE:RE:Is it possiblelogicandinertia wrote: Hey PoetMillionaire,
Page 18 in the company's AIF speaks to COVID-19 risk.
As with any REIT on the globe right now, the most important thing to recognize is the increased cost of capital, as debt is repriced. THe impact of COVID-19 is going to be felt more at the Retirement segment, which generated $11 million in NOI last year, about 15% of total and grew nicely. That isn't government funded, and likely to feel the brunt of COVID-19, as kids elect to either not put their parents in a home, or take existing guests out of the facility. THis may not be long-term in nature, but it would have an impact.
Why is this important ? AFFO fell last year, and the payout ratio for the dividend rose to almost 80%. A high dividend yield results in a higher cost of capital when raising equity and can inhibit growth plans. THis is a balancing act, and recognize that EXE doesn't have a massive cushion with its 80% current payout (pre any COVID-19 impact).
So like with any REIT in this current environment, be prepared that the DIVIDEND may at some point need to be cut from my perspective. That may not happen, but if COVID-19 has some last impact on occupancy, and debt refinancing costs go up, don't count on the dividend holding up. It would be prudent on management's behalf to keep financial flexibility top of the priority list. AND EQUITY HOLDERS always are lower in the capital structure than DEBT HOLDERS.
I like this market segment, but also recognize that EVERYTHING has changed in past several weeks, and we have to modulate our expectations. When CIBC is yielding 7.6%, for example, and Sienna Senior Living (9% on a lower payout ratio), EXE at 9.4% (with its higher payout ratio and potential disruptions around COVID-19) doesn't jump off the page.
Good luck.
That's very good.