Health Care REIT issues more shares. September 13, 2009Posted by shaferfinancial in Finance.
Tags: Buffett strategy, Great companies at fair prices, health care REIT
Last week Health Care REIT [HCN], one of my top investments issued more shares, which diluted profit sharing somewhat. On the surface this looks to be negative to current stockholders. However, it is another good move by management. The successful issuance of stock at around $40 allows two things to happen. First, they will retire debt that is due in 2011. With so much uncertainty around renewing debt by the banks, this puts the company on much more solid ground. Secondly, it gives the company the funds it needs to finish the projects it has on the planning board for 2010-2011. In other words, the business plan can go on without worrying about the credit market and its issues.
The speed in which the new stock issuance occurred tells the story of investor confidence. After all this company is 85% owned by large scale institutional investors with the resources to research the market as well as this company. Apparently, this company and its business model remains a favorite of these large scale investors.
The price remains fairly valued with a current yield of 6.6%. With a growth plan and financing in place look for increasing dividends to start up again in late 2010 or 2011.
Owning this REIT is part of my Buffett inspired strategy of owning great companies with enduring advantages and solid management. As Buffett has often pointed out it is better to buy great companies at fair prices than fair companies at great prices!