One of many FTSE 250 shares I’ve eyed for my portfolio at numerous instances in recent times is healthcare landlord Assura (LSE: AGR).

With its quarterly dividend now yielding 7.8% per 12 months, proudly owning the shares could possibly be a fine addition to my passive earnings streams.

Then once more, a 36% decline within the share price over the previous 5 years will not be spectacular.

Nonetheless, it may imply I now have a great shopping for alternative. Ought to I act on it?

Explanation why the share has declined

That kind of share price decline for an organization with a rising dividend doesn’t occur with out cause.

Within the case of Assura, I see a few key elements.

One is its stability sheet. Web debt stood at £1.2bn on the finish of March, up from £0.7bn 5 years beforehand.

At a time of upper rates of interest, servicing that degree of debt is a danger to profitability. Nonetheless, all of Assura’s drawn debt final 12 months carried a weighted common rate of interest of solely 2.3%. Final 12 months, Assura had web rental earnings of £143m and £29m of finance prices.

A second danger is the healthcare focus, as it’s a sector the place accusations of profiteering can imply there’s stress to decrease funding charges of return. Personally I don’t see that as a worrying danger. There’s a clear want for healthcare infrastructure. That must help present or larger hire ranges for now at the least, in a easy case of provide and demand.

Not for the faint-hearted

Nonetheless, whereas the FTSE 250 firm’s services could also be well-suited to the faint-hearted, I don’t assume its shares are.

The online debt issues me rather a lot. Assura is a property developer and landlord, so it’s comprehensible that it has borrowed to construct. The typical rate of interest appears respectable to me within the present atmosphere. However the long-term development in web debt signifies that not solely are curiosity prices substantial, the capital quantity to be repaid sooner or later can also be sizeable.

Taking the previous 5 years collectively, throughout which profitability has moved round considerably, the corporate has generated beneath than £200m general in income after tax. That’s lower than £40m per 12 months on common. For a corporation with £1.2bn in web debt that doesn’t impress me.

Partly that revenue degree displays the price of funding annual dividend development up to now a number of years. So freezing or chopping the dividend is an apparent method to assist fund a discount of the debt load – and I worry it may occur sooner or later.

No plans to speculate

The principle enchantment of Assura for me is its earnings, backed by a portfolio of properties more likely to profit from long-term demand and dependable tenants.

So any danger the stability sheet may finally pose to dividend sustainability is a pink flag to me.

For that cause, I cannot be including the FTSE 250 share to my portfolio. It may turn into a discount, however I don’t like the danger profile.