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.