Physicians have more financial sense than you might think

 

chart01Physicians Realty Trust, whose NYSE ticker is DOC, has been a breath of fresh air in the equity REIT space, which has challenged some of my beliefs. One of those beliefs is that physicians dedicate their entire lives to healthcare, leaving them with limited financial and stock market knowledge. This is turning out not to be true.

Physicians has invested in medical office buildings, which are in high demand due to the increasing number of outpatient services offered. Let me be clear. Medical office buildings are not hospitals. They include private physician’s offices, laboratories, imaging suites, and outpatient surgical centers. They may standalone or be associated with a hospital, as well as on or off campus.

Physicians has capitalized on the strong healthcare fundamentals in the United States. With the population aging and ObamaCare increasing the number of insured people, consumers are choosing healthcare options that are strategically located.

chart02Here are several beliefs that Physicians has made me question.

  1. For being a small cap, there should be additional risk premium.

Since Physicians went public in mid-2013, the company has grown fourteen fold. Today’s market capitalization is $1.8 billion and its valuation multiples have been in line with bigger peers. Its AFFO multiple is 20x versus their peers 14x. I don’t see Physicians being penalized for being a small cap.

  1. This is not an environment for raising equity.

The current selloffs made new equity offerings harder. However, Physicians was able to raise capital in late January to payoff unsecured revolving credit facility and invest in working capital and real estate.

  1. It is harder for a small cap company to become investment grade.

The company was awarded an investment grade rating by Moody’s in mid-2015.

  1. Due to its relative high valuations, dividend yield sucks.

Based on the universe of healthcare REIT stocks, Physicians has been in the bottom 1/3 in terms of dividend yields. However, compared with the overall REIT universe, its yield of 5.2% has been better than 60%.

  1. Beta must be high.

Small caps usually carry more risks than large caps as the former doesn’t have shock absorbers during unstable periods. Their shares tend to fluctuate more often. As a result, their beta is also high.

However, Physicians performance in the stock market has been relatively stable. They have a beta of 0.39, better than many large caps in the REIT space. As a matter of fact, the average beta for healthcare stocks has averaged around 0.33, which makes it a more stable sector.

On a final note, I haven’t been able to find any actual physicians on Physicians management team. It seems they are physicians in name only.

Source: Physicians Realty Trust(NYSE:DOC), Fast Graphs, Yahoo!Finance

Disclaimer: This newsletter is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Please do your own due diligence before making any investment decision. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.

Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.

 

 

 

 

U.S. REITs – Will Share Price Decline Stop Medical Properties Trust?

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Medical Properties Trust (NYSE:MPW) is in the upper echelon of healthcare REITs. The company has enjoyed relatively strong growth results, when measured against 2014 metrics, especially the funds from operations (FFO) per share, and projected FFO for the 2015 fiscal year. In addition, their current dividend yield of eight percent is above the sector median and price-to-FFO of 9.4x is below the sector median.

Medical Properties began distributing dividends in 2005. The company has yet to miss a quarterly dividend, and has always either increased or maintained the dividend payouts with the exception of 2008. At that time, Medical Properties decreased the dividends from $0.27 down to $0.20. After a long hiatus with zero dividend increases, the company has resumed dividend growth over the past two years. In March of this year, they increased dividends by five percent up to $0.22.

The majority of Medical Properties investments have been in net-lease healthcare facilities, particularly focusing on acute care and rehabilitation hospitals. The company is also in the mortgage business, providing both mortgages and other type of loans to their tenants. This book of business comprises approximately eleven percent of their assets. Medical Properties owns real estate in the US, and internationally as well. They have a large presence in California and Texas, and close to twenty percent of their investments are in Germany and the United Kingdom.

A main contributor to Medical Properties growth is their continued acquisition and development program. This has led them to grow their Adjusted FFO by forty percent in the second quarter of 2015, compared to the same period in 2014. To fuel this growth, Medical Properties has issued equity and debt over the past year. Last December, Medical Properties received an investment grade rating of BBB- on their unsecured debt from Standard & Poor’s.

More recently industry share prices have decreased, including theirs. This factor makes it hard to accurately determine how it has affected the company’s funding. This August the company announced a public offering of common shares to fund acquisition activity. Regarding debt, the company’s total debt to total capitalization has tended to be on the high side, reaching a high level when compared to other healthcare REITs.

Disclaimer: This newsletter is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Please do your own due diligence before making any investment decision. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.

Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.

U.S. REITs – National Health Investors Shines, But With A Caveat

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National Health Investors (NYSE: NHI) has proven that it is a star in terms of growing dividends, enjoying one of the highest dividend increases amongst healthcare REITs. Although they do not have a perfect record, the company’s second quarter results report robust metrics, thereby keeping their momentum in high gear. In addition, National Health Investors’ dividend yield is nearly six percent, and their price-to-FFO is at more reasonable levels than some other REITs.

National Health has benefited from a long history of doing business, and currently has a market capitalization of 2.2 billion dollars. Incorporated in 1991, records show that they did indeed have some tough times in the early 2000s, all well as the last recession. Funds from operations dropped and the company skipped paying dividends to their investors in some quarters.

Today, National Health Investors owns 187 properties in thirty-one states, with a significant amount being assisted living facilities that house seniors. The company also owns and leases skilled nursing facilities, hospitals, and medical office buildings. Currently, the company’s focus has been on investing in senior housing. Based on that fact, we do not see a drastic change in their current strategy.

Here are a few highlights of their performance in Q2 2015 year over year figures:

Revenues are up by twenty-eight percent.

FFO per share is up by ten percent.

Dividend rates are up by ten percent.

The Dividend payout ratio is at seventy-four percent.

Justin Hutchens, National Health’s former CEO, caught the market off guard by resigning this past August. He left to join HCP, a larger healthcare REIT, as the Executive Vice President, and Chief Investment Officer of senior housing and care. National Health’s new CEO has been a part of the company since earlier this year. This curveball does not make National Health a decisive buy. Only time will tell how the new CEO will perform because National Health’s latest figures are a result of the previous leadership.

Source: National Health Investors, Fast Graphs

Disclaimer: This newsletter is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Please do your own due diligence before making any investment decision. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.

Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.

U.S. REITs: Longest Dividend Paying Stocks (UHT)

See the advantage high dividend stocks offer investors.Combining quality with high yield produces interesting results.12 high quality stocks with 5%+ yields are examined in this article.

Sourced through Scoop.it from: seekingalpha.com

Thanks to the selloff from this past August, many investors have been able to harvest a great deal of opportunities in the healthcare sector in terms of dividends. Stocks within the healthcare sector itself have seen a decrease of approximately 17 percent this year thus far. This is something that ended up positioning this particular sector’s dividend yield to 6.3 percent, which is higher than the equity REIT median of 4.7 percent. Dividend yields are currently fluctuating between 5.1 and 10.2 percent. 


Ever since December of 1987, Universal Health Realty Income Trust (NYSE:UHT) has distributed steady, increasing dividends. The company will hit another annual milestone in just three months for having paid dividends without ever having to decrease them. This company is also known as one of the smallest publicly-traded REIT healthcare stocks, possessing a market capitalization of around $600 million.

 

Universal Health Realty Income Trust was launched in 1986 in order to acquire some of the properties of Universal Health Services (UHS), which is the company’s adviser and largest operator, as it’s responsible for approximately 25 percent of total revenue. The company currently owns 62 different investments in 18 states, which include the following:

 

*Acute care hospitals

*Medical office buildings

*Rehabilitation hospitals

*Behavioral healthcare facilities

*Sub-acute care facilities

*Child care centers

 

Executives have held positions in both Universal Health Realty Income Trust and Universal Health Services, with Alan B. Miller holding the offices of Chairman and CEO ever since the companies were launched.

 

The company’s dividend paying streak is expected to continue since their second quarter figures remain strong. Revenue saw an increase of 12 percent, with both AFFO and FFO per share also growing at about 4 percent. In addition, dividends increased by 2 percent, with dividend payout coming in at around 89 percent. Finally, debt to total capitalization has been recorded at approximately 26 percent, which is conservative. 

Disclaimer: This newsletter is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Please do your own due diligence before making any investment decision. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.

Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.

Does LTC Stand For Long Term Commitment?

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.

locationFor 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.

operatorThe 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.

fast graphRegarding 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

Disclaimer: This newsletter is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Please do your own due diligence before making any investment decision. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.

Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.