Healthpeak Properties (NYSE: PEAK) is a healthcare real estate investment trust (REIT) with over $20 billion worth of real estate. Properties include an outpatient facility in Poway, California; Lone Peak Hospital in Salt Lake City; and a medical park in Pensacola, Florida.

The company has been publicly traded for 38 years.

Healthpeak Properties yields 5.9%. But can investors rely on the $0.30 per share quarterly dividend?

Let’s find out…

Since Healthpeak Properties is a REIT, we use funds from operations (FFO) to determine whether the company can fund its dividend.

After a drop from $700 million to $611 million in 2021, FFO jumped last year and is forecast to grow again in 2023.

Last year, Healthpeak Properties generated $905 million in FFO while paying out $648 million in dividends for a payout ratio of 72%. I’m comfortable with REITs paying out as much as 100% of their FFO since, by law, they must pay shareholders 90% or more of their earnings.

Keep in mind, earnings are different from FFO, but because REITs pay out such a high percentage of their earnings, they also tend to pay out most of their FFO in dividends.

This year, Healthpeak Properties’ FFO is forecast to be $957 million while dividends paid is expected to increase slightly to $657 million for a payout ratio of 69%.

So the company can easily afford its dividend.

That said, here’s the problem…

Healthpeak Properties has cut its dividend several times in the recent past. Today, the dividend is nearly half of what it was in 2015.

Cutting a dividend will automatically result in a downgrade. Once management is comfortable taking away the punch bowl from investors (or at least diluting it), it will be apt to do it again when times get tough.

At this moment, Healthpeak Properties can afford its dividend. Should things get difficult, investors shouldn’t be at all surprised if management slashes the dividend again.

Dividend Safety Rating: C

More By This Author:

EOG Stock: Can Income Investors Stay Lucky With This Dividend Payer?
What America’s Debt Downgrade Means For Investors
Dow Stock: Does A 125-Year History Make This 5% Yield Safe?