In June, Ventas cut its dividend by 43% in response to pandemic-driven headwinds impacting its senior housing business (about 50% of net operating income). Occupancy fell to historic lows as restrictions on community access prevented move-ins, and expenses spiked for labor and personal protective equipment. The end result was a dividend that was no longer expected to be covered by the REIT's cash flow. Ventas' leverage increased as well, putting its BBB+ credit rating on watch for a downgrade at Standard & Poor's. While Ventas' rebased dividend improved its payout ratio, we wanted to see signs that a bottom was near for the company's senior housing business before considering a score change for the dividend.

Pfizer announced on Monday its COVID-19 vaccine candidate was found to be more than 90% effective, and no serious safety concerns had been observed. The drugmaker and its German partner BioNTech are the first to release successful results from a major clinical trial of a COVID-19 vaccine, according to Reuters. More data continues to be collected, but Pfizer expects to apply for emergency use authorization from regulators once the required safety milestone is achieved, which is expected to occur in the third week of November. The potential for a vaccine has been discussed since the pandemic set in earlier this year, but Pfizer's promising results increased the odds that a solution will indeed be found. The stock market jumped around 3% on this news, [...]

Dominion made its dividend cut official this week, reducing its fourth-quarter payout by 33% after closing a deal to sell its natural gas transmission and storage business. As we discussed in early July when this news was announced, we are upgrading Dominion's Dividend Safety Score to Safe with the lower dividend now in place. Without its midstream business, Dominion will generate 85% to 90% of its earnings from regulated utility operations, up from 70% to 75% previously.  The company's scale (over $10 billion in annual revenue), geographical diversity (utility operations span nearly 10 states), and large and growing (1.8% per year) customer base add to the strengths of this stable business.

AltaGas generates about 60% of its EBITDA from U.S. regulated gas utilities and the remaining 40% from an integrated midstream business in western Canada which connects natural gas liquids and natural gas to various markets. Source: AltaGas Investor Presentation The company in recent years went through a major transformation which culminated in a 56% dividend cut in December 2018. In January 2017, AltaGas decided to expand from its midstream roots and announced a $9 billion deal to acquire WGL, a U.S. regulated natural gas utility. The firm took on substantial debt to finance this deal.