LTC Properties Inc. is a small capitalization Healthcare Real Estate Investment Trust (REIT) based in Westlake Village, CA. The company specializes in Senior Housing properties located across twenty-nine states with a concentration in Texas, and Michigan. LTC’s dividend is the second lowest amongst its competitors, at 5.3 percent, and they have not had a dividend increase since late 2013. However, their FFO per share is expected to continue to grow consistently as it has over the past few years.
For the most part, the company’s properties are divided between skilled nursing facilities, and assisted living housing. Skilled Nursing properties, also known as Nursing Homes, take care of continuing cases in which the person needs round the clock care. For example, a patient with Alzheimer’s disease is a candidate for skilled nursing properties. On the other hand, assisted living facilities are built for far more independent elderly people who need assistance with everyday responsibilities.
LTC Properties partners with several private operators, some of which are publicly traded companies, with no singe operator accounting for more than fifteen percent of annual income. More than half of the company’s income is derived from private sources, with the remaining payments coming from Medicare and Medicaid. LTC’s leases are based on 10-15 year contracts. The leases are also triple net, meaning the tenant pays expenses such as taxes, insurance, assessments, maintenance, and repair.
The company’s balance sheet is one of the most conservative in the Healthcare REITs industry. They do not have a major loan expiring in the next two years, and most debt is unsecured. LTC enjoys a debt to total capitalization ratio of nineteen percent. A recent acquisition of a ten-property portfolio valued at $142 million USD will lead to an increase to 25 percent. However, that figure is still within the limits of a healthy debt profile.
If you invest in this stock it should be based on the steady growth. LTC Properties has been strengthening their pipeline, investing in acquisitions and development (mostly acquisitions), and steadily growing their business. Year over year revenues have grown 11 percent in the second quarter of this year versus last year’s Q2. FFO per share has grown more than 5 percent year during the past few years, and is projected to increase eight percent this year from $2.55 to $2.75.
The company’s dividend has been steadily growing over the past decade, at an average rate of six percent. However, LTC expects their 2015 dividend payment to fall in line with the one in 2014. The current dividend yield is at 5.2 percent; despite being the second lowest among all Health Care REITS, it is still a good overall figure. The dividend payout ratio to AFFO is at 86 percent. The combination of the steady growth and current payout ratio are good indications that the company will continue to increase dividends.
Regarding valuation, price to FFO is sitting at 15x, which is above the peer median. So far, stock price performance for 2015 has been down at $39, although it has nearly reached $49 during the past fifty-two-week range. There are less expensive healthcare stocks to investigate, but if you are looking for the long term in healthcare REITS, LTC Properties Inc. may be a good choice for you.
Source: LTC Properties, Fast Graphs
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