International Paper completed the spin-off of its printing papers business on October 1 and, as expected, rebased its dividend on Tuesday to reflect the firm's lower cash flow. The dividend was reduced by about 10% (better than management's original estimate of a 15% to 20% cut). With the spin-off complete and the rebased dividend in place, we are upgrading the firm's Dividend Safety Score to Safe. While box manufacturing is a cyclical business, International Paper's solid dividend coverage, strengthened balance sheet, and improved business mix seem likely to protect the dividend over a full economic cycle.

Last week iron ore prices tumbled 20%, marking the worst week for the mineral since the financial crisis in 2008. The sell-off was stamped by China implementing production limits for steel, the primary use for iron ore, to help ensure blue skies for the upcoming winter Olympics in Beijing.However, global steel demand had already begun to wane, led by the cooling housing market in China, the world's largest consumer of steel.

The Biden administration last week announced plans to require staff vaccinations within America's Medicare and Medicaid-participating nursing homes, which include the vast majority of Omega's tenants. Most nursing facilities have been trying to incentivize their workers to get vaccinated from the beginning, but only 61% of the nation's staff was vaccinated as of August 15. Already struggling with disruptive labor shortages, nursing homes may now face even more challenges. A vaccine mandate will make it harder to recruit talent, and some existing staff members may leave the profession for jobs with no such requirement.

In recognition of Walmart's improved payout ratio, lower leverage, and e-commerce traction, we are upgrading the discount retailer's Dividend Safety Score from Safe to VerySafe. For years, Walmart's earnings stagnated as labor costs rose faster than sales and more of its product categories lost ground to e-commerce rivals such as Amazon. This trend never endangered Walmart's dividend, but it clouded the big-box giant's long-term outlook for growth. Walmart's ironclad grip on the brick-and-mortar retail world was being challenged a by a new shopping format, one it had been slow to react to. Walmart scrambled to catch up, pouring billions of dollars into investments across e-commerce, technology, and its supply chain. The firm also made some poor acquisitions, including its 2016 purchase of Jet.com [...]