Property stalwart extends dividend run to 26 years

Its dividend has grown 26 years in a row, but is this healthcare property stalwart now at an attractive value?

Income investors with Primary Health Properties (LSE:PHP) in their portfolio got another trademark performance today as the FTSE 250 stock stretched its run of dividend growth to a 26th year.

The owner of NHS and other healthcare-based assets worth £2.8 billion in the UK and Ireland provides investors with exposure to one of the most secure income streams in the sector, underpinned by 90% of its rents backed by government bodies on long-lease terms.

The shares trade with a forward yield of 4.9% as Primary Health today announced plans to pay shareholders a first quarter dividend of 1.625p a share on 25 February. That's equivalent to 6.5p on an annualised basis and a 4.8% increase over the 2021 dividend level.

Broker Peel Hunt recently included Primary Health among its pick of top income stocks for 2022, but since its inclusion on the list the shares have fallen from 150p to 135p.

Peel Hunt analysts said today this presented an opportunity for new investors: “On unchanged forecasts, and given recent weakness, the shares offer an attractive entry price.”

Based on a forecast net asset value (NAV) of 120p, Peel Hunt said the shares were now trading at their smallest NAV premium and highest dividend yield for over three years.

The broker said last month that the yield was “highly attractive” for quasi-government income and in the context of low interest rates.

It added at the time: “The company has an attractive pipeline of acquisition and development opportunities, along with the prospect of refinancing historic, high-yielding debt facilities, which should all contribute to income growth.”

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Today's results from Primary Health showed net rental income up 4.2% to 136.7 million and adjusted earnings 13.8% higher to £83.2 million in a year when properties were used by the NHS and GP tenants to deliver Covid-19 vaccines and boosters.

The company also pointed to favourable long-term demographics, as well as increasing patient demand and the pandemic-fuelled drive by the NHS to transfer more services away from hospital settings to primary care premises.

Chief executive Harry Hyman said: “The need for modern, integrated, local primary healthcare facilities is becoming ever more pressing to relieve the pressures being placed on hospitals and A&E departments and to catch up on the backlog of missed procedures.”

Another stock on Peel Hunt's 2022 income list is LondonMetric Property (LSE:LMP), which also updated investors today after completing a couple of property deals.

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The logistics-focused REIT raised £15 million by disposing of a car showroom in Solihull. It reinvested the proceeds from this non-core asset “in a better located property” offering a significantly higher yield and material asset management potential.

The retail site in Middleway, Birmingham, which it acquired for £8 million, is let to Dunelm and Currys and generates about £700,000 a year of rent.

Shares rose 1.6p to 261.6p in the FTSE 250 index but Peel Hunt said recently the shares were worth 290p after noting the income appeal of a £3 billion portfolio that comprises 74% distribution and 23% grocery-led long income assets.

The broker also described the company as “extremely disciplined” and one of the most active in the sector when it comes to asset recycling and redeployment.

Elsewhere in the FTSE 250 index, shares in drugs company Indivior (LSE:INDV) jumped 13% as hopes for opioid use disorder treatment Sublocade to deliver $1 billion a year of sales were reinforced by a 88% jump to $244 million (£180 million) in today's annual results.

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Shares were as low as 40p in 2020 after the former Reckitt Benckiser division agreed a $600 million settlement with the US Department of Justice over the marketing of its Suboxone treatment.

The shares are now 256p after rising 28.8p today, but analysts at Stifel believe they have the potential to be at 300p. The City firm said: “In 2022, Sublocade is expected to become Indivior's largest-selling product for the first time.

“While the transition from Suboxone film has been rocky, the company has continued to focus on delivering on its objective of building Sublocade into a blockbuster product.”

With $1.1 billion of cash on its balance sheet, chief executive Mark Crossley signalled the potential for acquisitions. He also revealed Indivior is considering an additional US stock market listing to reflect the fact that about 80% of sales are in the country.