Thursday, 17 December 2015

Health Care REIT

Health Care REIT, Inc.

Sector:  Health Care
Beta Coefficient: 0.43
10 Yr Compound EPS Growth:  20.5%
10 Yr Compound DPS Growth: 2.5%
Dividend raises, past 10 years: 10 times.

Financial Result Year 2014

Revenues (m)     3,344
Net Income (m)    505.0
Funds from operations per share  4.13
Real Estate owned per share 69.5
DPS 3.18
Current yield 4.4%

High Price  78.2      DY 4.07%
Low Price   52.9     DY 6.01%

This is a large REIT, paying yield exceeding 5 percent.

It invests primarily in senior living and medical care properties primarily in the U.S.  

The REIT owns and/or operates some 1,328 properties in three countries and operates assisted living, skilled nursing, independent-living and the medical centers.

Health Care REIT operates in three primary business segments:
  • Seniors Housing "triplet-net" segment:  primarily owning senior housing properties.  This segment owns 666 properties, most in the US and contributes 33% of revenues.
  • Seniors Housing Operating segment which operates 202 properties in 34 states, 54 in Canada and 41 in UK and contributes about 43% of revenues.  This is the fastest-growing segment.
  • Medical Facilities which operates office space set in 241 facilities for medical purposes, inpatient and outpatient medical centers and life science laboratories, contributing about 14% to revenues.

Occupancy rates are 87.7% in the Seniors Housing triple-net segment, 90.3% in the Seniors Housing Operating, and 94.4% in the Medical Facilities segment.

In 2014 and early 2015, the company made two medium-sized common stock sales, which hurt the stock price temporarily but also funded the acquisition of $3.7 billion in new real estate investments.

The company added a modest number of shares again in 2015 to fund acquisitions and to approach a goal of 60% equity.

REITS are typically good income producers, as they are required by law to pay a substantial portion of their cash flow to investors.

The accounting rules are different, and REIT investors should focus on Funds From Operations (FFO), which is analogous to operating income.
(Net income figures have depreciation expense deducted, which can vary in timing and not always be realistic.)

FFO support the dividends paid to investors.

Investing in such a REIT, you are investing in real estate and in the health-care industry, and with the property mix owned by Health Care REIT, you are investing in the aging population.


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