American Healthcare REIT, Inc. (AHR) Cash Flow Statement

The dividend payout ratio improved to 0.46 in 2026Q2 from 1.51 in 2024Q4, indicating a significant reduction in dividend strain. However, AFFO has been erratic, with 2024Q4 showing negative AFFO, so the recent coverage may not be sustainable. Investors should monitor whether AFFO can consistently exceed dividends by a comfortable margin, especially as the company concentrates capital in senior housing.

The gap between FFO and AFFO, averaging $45M per quarter, highlights substantial recurring capex for tenant improvements and leasing commissions, typical for healthcare properties. This capex intensity is higher than triple-net peers, reflecting the operating nature of AHR's senior housing assets. The elevated capex may pressure AFFO growth if not offset by revenue gains.

The large positive OCF relative to net income suggests non-cash items like depreciation and amortization are significant, but also that working capital changes are material. For instance, 2025Q3 saw OCF of $107M despite net income of $55.9M, while 2025Q1 had negative net income but positive OCF. These swings may reflect timing of rent collections and payables, warranting attention to tenant receivable quality.

The improvement in dividend coverage suggests reduced dependency on external funding for distributions. However, the company's growth strategy may still require external capital, as evidenced by occasional negative FCF quarters. Monitoring the use of ATM programs or debt issuance will be key to assessing balance sheet strain.

The FFO-to-net-income ratio of 3.88 in 2026Q2 highlights the significant non-cash depreciation expense, which is typical for REITs. This distortion makes GAAP net income less relevant for valuation, and investors should focus on FFO and AFFO. The magnitude of depreciation is consistent with a heavy real estate asset base, but the volatility in FFO/NI across quarters suggests other non-cash items may also be at play.