Welltower (WELL) reported earnings after the market closed today and announced plans to reduce its dividend by 30%: The financial headwinds resulting from the pandemic will create significant pressure on our near-term cash flow, leading to the difficult, but prudent decision to reduce our quarterly dividend to 70% of pre-COVID levels. Based on WELL's closing price, the stock's new forward yield is 5.4%. As we discussed in our note yesterday when we downgraded Welltower's Dividend Safety Score to Borderline Safe, it wasn't clear how management might respond to the headwinds facing the business:  The company has the balance sheet and liquidity to maintain its dividend during this period, but management may choose not to without more clarity on the depth and duration of these coronavirus-related [...]

National Retail Properties (NNN) reported earnings yesterday and revealed that a dismal 48% of rent went uncollected in April. May could be even worse than April as shutdowns persist and more businesses grapple with reduced economic activity and no return to normalcy in sight. Troubling NNN is the firm's high exposure to several industries impacted heavily by the pandemic, namely restaurants (19.9% of rent), family entertainment centers (6.7%), gyms (5.2%), and theaters (4.7%). Source: NNN Supplemental NNN's focus on non-investment grade tenants may be hurting performance as well. Management noted that they were more successful collecting rent from investment grade tenants, who comprise only 18% of NNN's portfolio.

On April 10, we published a note reviewing Welltower's (WELL) dividend safety and exposure to the coronavirus pandemic. More information about the state of the senior housing market has trickled in since then, and it's been worse than expected. As a result of these headwinds, we believe Welltower's cash flow may no longer cover its dividend for at least a couple of quarters. The company has the balance sheet and liquidity to maintain its dividend during this period, but management may choose not to without more clarity on the depth and duration of these coronavirus-related headwinds. In light of these mounting challenges and the uncertainty they create for the payout, we are downgrading Welltower's Dividend Safety Score to Borderline Safe.

Brookfield Property Partners L.P. (BPY) is a major owner, operator, and investor in commercial real estate. In 2019, the firm generated approximately 46% of its net operating income (NOI) from retail assets, 35% from offices, and 19% from equity investments in Brookfield-sponsored real estate opportunity funds. We expect the coronavirus pandemic to impact each of these income sources, pressuring Brookfield Property's credit metrics and causing its distribution to no longer be covered by cash flow in at least the short to medium term. As a result, we are downgrading Brookfield Property's Dividend Safety Score from a low Borderline Safe score to Unsafe. Brookfield Property's office portfolio (35% of NOI) will likely be the most resilient. These properties are primarily located in gateway markets [...]