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Health Care REIT [HCN] September 18, 2013

Posted by shaferfinancial in Uncategorized.
Tags: , , ,

I have owned this stock for well over 12 years.  And I have been gradually concerned with the dividend. Not that there is concern of it’s ability to make the dividend payment, only that it has not increased its dividend at a high enough rate.  Given that background here are the last quarters particulars.

2Q13 normalized FFO of $0.93 per share, a 4% increase versus 2Q12

2Q13 normalized FAD of $0.82 per share, a 4% increase versus 2Q12

2Q13 same-store cash NOI by 3.8%, including 8.4% growth in the seniors housing operating portfolio

Increased private pay mix to 82% in 2Q13 from 74% in 2Q12

Issued 23 million shares of common stock, generating $1.7 billion of proceeds in May

Received $366 million in proceeds on dispositions in the first half of 2013, generating $52 million in gains

Completed gross new investments of $1.5 billion in 2Q13 and $959 million in 3Q13 to-date

Expanded international portfolio with $1.3 billion investment in Canada with Revera in May and $213 million

investment in the U.K. with Avery Healthcare in July

Completed final tranche of $4.3 billion investment with Sunrise Senior Living in July

As you can see, they are steadily increasing their income from operations and funds available for distribution at a 4% rate. It increased the dividend to $.765 an increase of 3.8% over last year.

In essence during this time of low interest rates, and high acquisitions they are able to increase their dividend at a rate lower than 4%.  

For me, this is not good enough.  I would want to see a 6-8% increase going forward.  Simply put the company is  positioning itself well for the future, de-leveraging over the last 5 years, and making high quality acquisitions; but not increasing its dividend at a rate it should.  It is a conundrum for me and my portfolio.

The other thing happening it is highly valued.  So I decided to sell 25% of my holdings.  I will probably sell another 25% as we go forward unless the value dips significantly.

The question for me is not how it has done in the past [my yield on cost is over 15%], but where to put my money for the future.

Next post will describe what I did with the proceeds.  Let’s just say I more than doubled my dividends! 



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