The outlook for retail REITs continues to dim as the coronavirus pandemic drags on and fewer businesses are able to pay rent. Nareit, a producer of REIT research, recently conducted a survey of 54 publicly-listed REITs and found that shopping center REITs have only collected 46% of their rent this month as of mid-April. Rent collection rates will vary significantly between retail REITs depending on their mix of tenants and property locations, but Kimco's (KIM) exposure is concerning. Kimco generates approximately 78% of its annual base rent from grocery-anchored shopping centers and has historically focused on service-based tenants, which face less pressure from e-commerce.

Earlier today, Standard & Poor's lowered Walt Disney's (DIS) credit rating from A to A- and maintained a negative outlook on the firm's rating. Given the rising credit rating pressure facing Disney, management's desire to maintain a mid-single A leverage profile, and the increased likelihood of theme park profitability remaining weak for longer, we are downgrading the company's Dividend Safety Score from Borderline Safe to Unsafe. As we discussed in our April 5 note, almost all of Disney's businesses are under pressure due to the COVID-19 pandemic, reducing its ability to pay down debt following its $71 billion acquisition of 21st Century Fox in 2019. Disney's theme parks (38% of sales) remain closed indefinitely. Its TV and film studios (16%) can't complete production or [...]

On March 16, we discussed how the coronavirus pandemic could hurt the performance of Ventas' (VTR) senior housing business. Since then, the number of challenges facing Ventas across almost all parts of its portfolio has continued to rise. As a result, the firm's cash flow now seems likely to fall short of its dividend for the foreseeable future. While Ventas could borrow to continue paying its dividend, it may choose not to in this highly uncertain environment. Given this backdrop and the conservative view we take when assessing dividend risk, we are downgrading Ventas' Dividend Safety Score from Borderline Safe to Unsafe.

Healthcare Trust of America (HTA) is the largest publicly-traded REIT focused on medical office buildings in the U.S. with more than 450 properties. Healthcare systems, academic medical centers, and physician groups rent HTA's properties to provide healthcare services. No tenant accounts for more than 5% of total rent, and no state contains more than 20% of HTA's buildings. Approximately 66% of HTA's portfolio is located on the campuses of, or adjacent to, nationally and regionally recognized healthcare systems. This helps create more demand from medical practices for the firm's properties. Usually, this is a predictable business given the stable nature of healthcare services. But the coronavirus pandemic has put some of HTA's tenants under immense financial pressure.

EPR Properties (EPR) provided a brief company update this evening. Management said that since EPR's last update on March 24, "the impact of the pandemic has increased significantly with the temporary closing of substantially all of its customers' operations." Tenants and borrowers have paid just 15% of April 2020 base rent and mortgage payments. EPR agreed to defer these payments on a month-to-month basis for substantially all of the customers that have not paid rent this month. The big question is how many of EPR's tenants will survive this crisis. Movie theaters drive 45% of EPR's revenue, and Eat & Play businesses such as TopGolf and Pinstripes account for another 23% of sales. Education facilities represent 11% of revenue as well.

Halliburton (HAL) has paid uninterrupted dividends for decades, but the firm's streak looks increasingly likely to come to an end in the near future. The oilfield services provider this morning reported earnings. Unlike in the past, management emphasized that Halliburton would not lean on its balance sheet to protect the dividend during this down cycle: Finally, our dividend is a lever we can pull, based on our market outlook and valuations. Our board and management review the dividend quarterly, and will act prudently to make adjustments for the long-term success of our business. Let me be clear. We have no intentions to increase leverage to maintain the dividend. We also do not intend to allow the dividend to prevent us from being structurally [...]

International Business Machines (IBM) this afternoon reported first-quarter earnings results. So far, business is holding up reasonably well. Management said that about 60% of IBM's revenue is in recurring businesses such as long-term services contracts, software streams, and financing arrangements. In 2008, at the last recession, annuity-like businesses only accounted for around 45% of revenue, suggesting the firm could have greater resiliency in a downturn today. IBM also noted that over 70% of its revenue comes from industries that are expected to be "either moderately or minimally impacted by COVID-19" according to classifications from research firms IDC and Gartner. Examples include financial services, telecom, and the public sector.

Meredith (MDP) suspended its dividend today, citing "significant advertising campaign cancellations and delays." The media company's advertising revenue has taken a major hit since the coronavirus pandemic emerged as businesses across almost every industry have slashed non-core expenses. We downgraded Meredith's Dividend Safety Score to Unsafe on March 31. We had previously downgraded the firm's rating to Borderline Safe last September due to weak prospects and heightened leverage from the Time acquisition. Until today's announcement, Meredith had paid uninterrupted dividends for more than 70 consecutive years.

Formed in 2003, Medical Properties Trust (MPW) is one of the world's largest owners of hospitals with around 400 facilities and more than 40,000 beds. The REIT's properties are leased or mortgaged by hospital operating companies. MPW's largest tenant, Steward Health Care, accounts for close to 25% of its portfolio (down from 38% at the end of 2018). Its next two largest tenants represent 13% and 10%, respectively, and no single property accounts for more than 2.3% of the portfolio. Source: Medical Properties Q419 Supplemental Information Approximately 67% of MPW's are located in the U.S., followed by the U.K. (16%), Germany (7%), and Australia (5%).

In our last General Motors (GM) note on March 19, we wrote the following about the automaker's Borderline Safe Dividend Safety Score: If measures put in place by governments to slow the spread of the coronavirus become more drastic or prolonged, and if economic conditions materially worsen for consumers, then GM's dividend risk profile could need to be reevaluated. Shares of GM have surged more than 40% since then, but the outlook for auto producers has arguably continued to dim. Production shutdowns have been extended, the employment backdrop has become weaker, and demand for big-ticket purchases seems increasingly likely to be deferred for a while after the pandemic subsides.