Excessive bond yields make this a great time to think about shopping for dividend shares. And there are just a few on my checklist in the meanwhile. 

One is Assura (LSE:AGR), the FTSE 250 actual property funding belief (REIT) with lots of options that might make it a dependable supply of passive revenue for buyers.

Please observe that tax therapy relies on the person circumstances of every shopper and could also be topic to alter in future. The content material on this article is offered for data functions solely. It’s not meant to be, neither does it represent, any type of tax recommendation.

The equation

During the last 12 months, Assura shares have fallen by round 23% and the share price has hit 36.26p consequently. With the agency set to distribute 3.36p per share this 12 months, the implied dividend yield‘s 9.26%.

Meaning the quantity somebody would wish to take a position with a view to generate £1,000 a 12 months in dividends is £11,025. That’s £10,791 for 29,761 shares, plus £234 in stamp responsibility.

A falling share price and a excessive yield is usually a signal buyers are involved concerning the agency’s means to maintain paying dividends. But when they’re flawed, this may very well be an incredible passive revenue alternative.

A 9.26% yield is eye-catching with authorities bonds providing above 5%. So I believe it’s nicely price trying on the inventory to see whether or not the returns truly is perhaps extra sturdy than the market realises. 

The enterprise

Assura owns and leases a portfolio of 608 GP surgical procedures and healthcare properties, the overwhelming majority situated within the UK. In consequence, the agency will get virtually all of its rental revenue from the NHS. 

From a passive revenue perspective, this may very well be an excellent factor. An organisation backed by the UK authorities is unlikely to expire of cash, making the danger of hire defaults comparatively low. 

It does nonetheless, imply the danger of a change in authorities coverage is kind of vital. However in the meanwhile, issues appear to be shifting in the suitable course when it comes to UK healthcare coverage. 

Progress usually comes from growing and increasing current properties somewhat than buying new ones. However the firm did purchase a portfolio of hospitals final 12 months at a value of £500m.

Dangers and rewards

As is usually the case with REITs, the largest dangers with Assura come from its stability sheet. It has lots of debt and the common time to expiry is lower than 5 years. 

REITs have restricted choices in terms of managing their money owed. Being required to return 90% of their taxable revenue to shareholders means they will’t use it to repay excellent loans. 

However Assura’s making strikes to carry down its debt ranges by promoting off a few of the properties in its portfolio. Nonetheless, this clearly means much less in the best way of rental revenue.

An organization with dependable rental revenue ought to be capable of handle a better debt load than one with extra unstable tenants. However I believe that is the largest danger for buyers to concentrate to. 

Ought to I purchase?

I presently personal shares in Main Well being Properties in my portfolio, which is a really related enterprise. Including Assura might assist preserve the same revenue stream whereas lowering company-specific dangers.

On that foundation, shopping for 29,761 shares to search for a £1,000 a 12 months second revenue doesn’t seem to be a foul thought. It’s positively one I’m contemplating for my Shares and Shares ISA.