I'm in - looks cheapBased on first half results the company is making $0.80 in EPS and $1.00 in CFPS annualized.
The encouraging signs is that these levels are considered disappointing and the company is looking for improvements in the second half of the year due to increased business (they recruited more doctors) and the fact that there is a seasonal factor (more poeple want to do surgeries in the summer or in Q4 to use their insurance for the year.
Of course, there is always a danger that the disappointments get larger.
Assuming status quo, NHC now trading at 5.3X EPS and 4.2X CFPS. Any objective person can see that all other thngs being equal its stupidly cheap. There is probably an equal chance of improvement or deterioration so this level is an appropriate assumption.
NHC's $1.20 annual distribution would be unsustainable. I can envision a cut to $0.06/month or $0.72/year. although a cut to $0.08/month may seem more appropriate it is better to cut once and leave lots of cushion. This will also allow the company to have exces capital so that it is better prepared to make acquisitions in the future.
For now though NHC should leave the distribution at $0.10 until after Q3 results. The company has about $4 mm in cash and no debt so to pay a little extra for 3 months is a non-issue. In the event that their prediction of CFPS rising to (or above) $0.10/month then management could claim that they kept the story in tact and we would see the maximum share price recovery possible.
In the event of another $0.25/quarter CFPS in Q3 then cut it to $0.06/month. That's still a great 17% per annum.