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To me, a good dividend stock should possess a few key characteristics. This is an attractive reward policy for investors, ideally some defensiveness and positive future prospects to keep the dividends coming.
I think I found one that meets all of these requirements. Sure (LSE: AGR). Here's why I plan to buy some stocks as soon as I have some cash to invest.
Health properties
Assura is established as a real estate investment trust (REIT). In exchange for tax breaks, companies created this way must return 90% of profits to shareholders, hence the appeal of purchasing such shares for passive income purposes. I already own a few other REITs.
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The company specializes in healthcare properties, such as GP surgeries and other provisions. It mainly rents its facilities to the NHS.
Assura shares are down 16% in a 12-month period from 49p this time last year to current levels of 41p. This is due to economic volatility, which has hurt real estate stocks.
Dissecting my desired traits
Firstly, due to the composition of REITs, they are good passive income stocks with an attractive reward policy for investors. Additionally, Assura currently offers a dividend yield of 7.9%. This is higher than the FTSE 100 and FTSE 250 index averages. However, it should be noted that dividends are never guaranteed.
Also, since it provides healthcare facilities, there is a defensive aspect as healthcare is a basic requirement for everyone. Plus, the business could continue to do well. Leasing from the government, through the NHS, is a smart strategy. It usually involves long-term contracts and the possibility of default is practically zero.
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 profitability.
It's also worth noting that Assura shares are good value for money with a P/E ratio of just 12.
Risks and my verdict
When it comes to Assura, two key risks come to mind. First, continued economic turmoil could be bad news for the stock price. As higher interest rates put downward pressure on net asset values (NAVs), investor confidence could remain low and hurt stocks.
Next, NHS services are in high demand, but the government needs to address staffing issues. Many healthcare professionals are leaving the industry or moving abroad with aspirations for better work-life balance and working conditions. Could Assura be trying too hard to build new facilities, only to discover that the NHS doesn't need them due to lack of staff? This is a real possibility, in my opinion.
Overall, the bullish aspects far outweigh the bearish ones for me. Assura hits the mark for what I'm looking for, hence my optimism about the stock and its potential to provide me with consistent returns.
