In April, we discussed how the COVID-19 pandemic caused a drop in demand for non-emergency procedures, increasing financial pressure on MPW's hospital tenants. With many hospitals struggling to earn a profit, it was unclear if MPW's tenants would be able and willing to pay their full rent and keep all of their facilities open. So far, rent collection has not been a problem for MPW. On June 22, the REIT reported that it received 96% of June rent, consistent with April and May.

After cautioning in early May that "by no means is the dividend untouchable," National Retail Properties (NNN) appears to feel more confident that its payout will remain secure as lockdown measures continue easing. In April, NNN's 52% rent collection rate was among the weakest of any retail REIT. But at an investor conference on June 8, management said they "feel very good about the trajectory of rent for May and for the rest of the second quarter." When asked if NNN would extend its 30-year dividend growth streak in mid-July (when NNN historically announces its annual increases), management expressed much greater optimism:

On June 15, STORE Capital (STOR) provided a business update and opted to maintain its dividend for the second quarter. Management was encouraged by an increase in rent collection, giving the team more confidence that cash flow coverage will improve in subsequent months to preserve STORE's financial strength. STORE said it had received 76% of June rent to date. That's up from 67% in May and 70% in April. The increase was led by health clubs, full-service restaurants, and family entertainment centers. Only one new rent deferral request was received in June, too. "STORE is maintaining our $0.35 dividend and we'll pay it as scheduled on July 15. The announcement reflects our Board's desire to maintain our dividend, together with [...]

McDonald's (MCD) provided a business update yesterday which showed continued improvement in sales trends from late March through May. In the U.S. (36% of total revenue), comparable sales were down only 5.1% in May, a meaningful improvement compared to a 19.2% decline in April.  Overall, comparable sales worldwide fell about 21% in May, improving from a 39% drop in April. As lockdowns continue lifting, additional stores reopening will hopefully drive a continuation of these trends.  As of June 15, approximately 95% of McDonald's 38,000-plus locations were open. That's up from 75% at the end of April. Franchisees are requiring less financial assistance from McDonald's as a result.  In March, when a lot of markets were immediately shut down, McDonald's felt greater urgency [...]

On June 16, National Health Investors (NHI) provided a brief business update and maintained its regular dividend for the second quarter. As we discussed in our May note, NHI's dividend faces some uncertainty due to the pandemic's impact on the senior housing industry (nearly 70% of NHI's revenues). Senior housing operators, which have low margins to begin with, face higher labor and equipment costs to protect their vulnerable populations from COVID-19, and occupancy is falling as move-in activity freezes.As a landlord, NHI is insulated from these unfavorable trends as long as its tenants can continue paying their rent. But NHI's three largest tenants, which account for about 44% of the firm's rent, had somewhat fragile rent coverage ratios (i.e. cash flow to rent [...]

On June 11, ONEOK (OKE) announced it would sell 26 million shares of common stock, increasing its shares outstanding by about 6.3%. The offering was priced at $32 per share, well below the stock's $42 closing price the previous day. As a result, ONEOK's stock slumped about 16% on Thursday and 4% on Friday, finishing the week near $34 per share. With ONEOK's dividend yield shooting back above 10%, income investors are left wondering how this action could affect the firm's dividend safety. For now, we are maintaining ONEOK's Borderline Safe Dividend Safety Score. On one hand, ONEOK's capital raise improves its cash on hand and helps reduce leverage.

Since bottoming on March 23, shares of Con Edison (ED) have returned less than 20% while the utilities sector (XLU) has rallied 40%. As a result, Con Ed's dividend yield still hovers near 4%, above its longer-term average. Like its peers, Con Ed faces a number of challenges stemming from the pandemic including reduced power consumption, higher bad debt expenses, and rockier credit markets. But Con Ed's service territory footprint magnifies some of these issues. The regulated utility generates the vast majority of its earnings from providing electricity and gas to the New York City area, one of the hardest hit parts of the country. In early May, Con Ed reported that its commercial electric delivery volumes were down nearly 20% year-over-year [...]

NetApp (NTAP) sells hardware and software to enterprises implementing data storage solutions at on-premise data centers and within cloud environments. Modern companies produce huge amounts of data that can be rapidly analyzed, securely accessed, and easily monitored with NetApp's storage solutions. Competition is stiff. Not only does NetApp contend with hardware providers like Dell, IBM, and numerous startups, but cloud providers (Amazon, Google, etc) have disrupted the traditional model of companies purchasing their own equipment. Still, many enterprises (for regulatory reasons or otherwise) demand on-premise or colocated storage, which is where NetApp excels.

None of the oil majors can cover their capital spending and dividends at today's oil price, even after slashing their investment plans. Oil needs to be closer to $50 to $60 per barrel for these companies to breakeven on their obligations, according to data from Bloomberg. Source: Bloomberg, U.S. Energy Information Administration, Simply Safe Dividends The price of oil has started to rebound off its April lows with lockdowns being lifted and supply falling. But at today's price near $39 per barrel, the oil majors will continue burning through cash.

Franklin (BEN) reported earnings on April 30, providing a first look into the impacts of March's market turmoil on the active fund manager. Naturally, Franklin's investments declined in concert with markets. Assets under management (AUM) fell 17% to $580 billion, leading to a 7% decline in management fee revenue compared to the previous quarter. More notably, a flurry of client redemptions in fiscal Q2 led to a sharp increase of $25.4 billion in net outflows from Franklin's equity and fixed income funds.