This 5.5%-yielding FTSE 250 share looks cheap to me

One of the stocks I’ve been looking at for my portfolio for the past few months is healthcare employers Assura (LSE: AGR). Shares have fallen in the past year by 16%. Not only does it mean that I can now buy for less, but it also gives me a profit of up to 5.5%. That compares to many others FTSE 250 sharing.

With a proven business model and a history of annual dividend increases, I think the stock is now attractively priced. If I had spare cash to invest in stocks today with the goal of increasing my income stream, Assura is one of the companies I would buy.

Direct business model

I think the nature of the company’s business makes it easy to understand. Assura owns the property which is then rented out.

In particular, the tenants are healthcare providers, such as ambulance depots and GP surgeries.

What is interesting about this is the tenant profile. I expect healthcare demand to remain high. Healthcare providers need real estate that can be grounded, often for many years. Rent defaults are a risk for landlords. But I think a medical professional such as a local doctor’s surgery should be a reliable option when it comes to paying in full and on time.

Big dividends

The business now has an annual rent roll of £142m and last year’s pre-tax profit rose 44% to £156m.

But the FTSE 250 landlord is not resting. It already owns more than 600 properties and currently has 11 developments underway, with another 10 in the pipeline.

With a healthy portfolio of profitable properties, Assura pays a monthly dividend. The company has grown in each of the past nine years. If the business continues to perform strongly, I expect the dividend to continue to rise. However, payment is never guaranteed. Changes in the business environment or dividend strategy may result in a reduction.

Falling stock prices

While I see Assura as an attractive option for my portfolio, not all investors seem impressed.

The company’s declining share price over the past 12 months gives me pause for thought as an investor. I have tried to understand the factors that can affect the price.

One concern is that the company ended last year with net debt of £1.1bn. That’s pretty big for a company with a market capitalization of £1.7bn. If interest rates keep rising in the coming years, it could hurt Assura’s profits.

I will still buy it

Despite the risk, I would happily buy this stock for my portfolio today if I had the money to invest.

I like their business model. Demand for healthcare properties remains resilient and is likely to increase over time. Assura is an established operator with a proven business model. The dividend yield is attractive and I see active room for growth if the business remains reasonably profitable.