Should I buy 29,761 shares in this FTSE 250 dividend REIT with £1,000 a year in income?

High bond yields make this a good time to consider buying dividend stocks. And there are a few on my list right now.

One is Assura (LSE:AGR), i FTSE 250 A real estate investment trust (REIT) has many features that can make it a reliable source of income for investors.

Please note that tax treatment depends on the individual circumstances of each client and may change in the future. The content of this article is provided for informational purposes only. It is not intended to be, and does not constitute, any form of tax advice.

The figure

In the past 12 months, Assura shares have fallen by around 23% and the share price has reached 36.26p as a result. As the company intends to distribute 3.36p per share this year, the implied dividend yield is 9.26%.

That means the amount a person would need to invest to make £1,000 a year in dividends is £11,025. That’s £10,791 for 29,761 shares, plus £234 in stamp duty.

A declining share price and high yield can be a sign that investors are concerned about the firm’s ability to continue paying dividends. But if they are wrong, this would be a good opportunity to do nothing.

The 9.26% yield catches the eye with government bonds yielding more than 5%. So I think it’s worth looking at the stock to see if the return might be more durable than the market thinks.

Business

Assura owns and leases a portfolio of 608 GP surgeries and healthcare facilities, the majority of which are located in the UK. As a result, the company receives almost all of its rental income from the NHS.

From an income perspective, this can be a very good thing. A UK government-backed organization is less likely to go bankrupt, making the risk of paying rent less.

However, it means that the risk of change in government policy is very important. But for now, things seem to be going in the right direction in terms of UK healthcare policy.

Growth usually comes from improving and expanding existing properties rather than acquiring new ones. But the company acquired a portfolio of hospitals last year for £500m.

Risks and rewards

As is often the case with REITs, the biggest risks for Assura come from its balance sheet. It has many loans and the average maturity is less than five years.

REITs have limited options when it comes to managing their debt. Being asked to return 90% of their taxable income to shareholders means they cannot use it to pay off their loans.

But Assura is making moves to reduce its debt levels by selling some of the properties in its portfolio. However, this obviously means little in the way of rent.

A company with reliable rental income should be able to handle more debt than one with variable tenants. But I think this is a big risk for investors to be aware of.

Should I buy?

I currently own shares in Basic Health Structures in my portfolio, which is a very similar business. Adding Assura can help maintain a consistent revenue stream while reducing company-specific risk.

On that basis, buying 29,761 shares to look at a £1,000 a year second income doesn’t seem like a bad idea. Definitely another one I’m considering for my Stocks and Shares ISA.