May has been a very fun month, to say the least! I’ve been a more active investor, I feel, and have made a few purchases actually. The market has been interesting lately, finally a little correction (as it so seems) is taking place and amazing bargain stocks are shedding their heads on the horizon, and damn – do I wish I had more cash sitting around! I made a purchase this month, come and check it out.
Recent Purchase – HCP
To continue with adding to my positions, as I did in DOW Chemical earlier this month, I saw HCP tumble in share price by over 10% this year to date, and actually over 7% in the last 30 days – opportunity I may say? I made a paltry purchase of $258 earlier this year that I didn’t bother to write about, simply because I felt it wasn’t “material” enough (there I go, speaking in public accounting terms again). I made that purchase because I had a free trade that was to expire, so thought – it’s a high yielding, health care REIT that has increased their dividend for quite a bit of time (15 years plus) and the price at the first purchase was around $42.06. Well, that price has changed, for the better.
HCP: HCP Inc. invests in real estate serving the healthcare industry in the United States. The Company is a self-administered real estate investment trust (REIT). The Company acquires, develop, leases, manages and dispose of healthcare real estate, and provide financing to healthcare providers. Thanks google for the information, by the way. Similar to my other “small” positions in the 3 health care REITs I purchased last year, this one is a bigger player with a better track record and completes a great position for healthcare going forward. Like others, I feel healthcare and something especially related to healthcare providers are only going to increase in number, costs and fulfillment of placements, given the longevity of life we have now, and other many, many factors.
But wait, they aren’t on our May Watch list? I know, I know – you can kick my ass! The watch list stocks have been staying put, especially with NSC continuing their decline, as Bert was able to scoop a few more up. So HCP slid back into the radar, why? Let’s look at the numbers:
1. Price to FFO: Instead of using EPS, we are going to use the Funds from Operation here, which Q1 reported at $0.79 per share. Given this and annualizing it out, equates out to $3.16 per share. Purchase price was $39.32, which shows 12.44, not too shabby eh? Fairly low in my opinion.
2. Payout Ratio: To maintain consistency, we will use the annualized FFO of $3.16. Current dividend total is $2.26, therefore, the ratio is looking like 71.5%, which is under the threshold of approximately 90% that the REITs distribute out as dividends – therefore, I feel very comfortable with this percentage for a REIT, it’s not over 100%, which is nice to see.
3. Dividend Growth: Since they are a higher yielder, as you’ll see below, they aren’t like our listing of low yield, high dividend growth stocks we had mentioned in the past. Therefore, there is a trade off with the yield in regards to the dividend growth rate, which I feel is very, very powerful. However, it’s worthy to note they have increased the dividend for over 15 years and the 3 year growth rate is at 4.24% vs the 5 year growth rate at 3.72%. I feel confident this will continue at a 3-6% growth, I don’t mind it given the yield…
4. Dividend Yield: At the purchase date, it was $39.32 with a $2.26 dividend or a yield of 5.75% approximately. Not too shabby and is higher than my overall yield. Also, I feel it’s protected with the cushion mentioned above.
5. Dividend Yield 5 Year Average: I do love this stat, find out why. The 5 year average dividend yield is at 4.90%, therefore, the yield is currently 85 basis points higher, I like it.
Overall Analysis: This is a high yielding, dividend growing (small but still is) within an industry that is only going to gain more transaction than it already has and I made the purchase based on creating a bigger position and finding value within this entity, given a further decrease on price by quite a few dollars from my initial purchase.
Stock Purchase Summary
I deployed a total capital amount of $1,737.03, buying 44 shares (with a fee) of HCP and added $99.44 to my forward looking dividend income. As I talked amongst comments across the blog community, I wanted to develop more round positions for stocks that I own and didn’t want to have “small” positions anymore, similar to my latest purchase into DOW. This nice purchase also allows me to reach closer and closer to my goals for 2015. This purchase was also made within my Roth IRA account.
What does the community think of this purchase? Have you been making moves on health care REITs lately? There’s been a nice pullback – what moves are YOU making? What do you see in the landscape? Thanks everyone, appreciate the feedback!
-Lanny
Lanny,
Nice pickup. We have been finding the REIT names to be attractive as well focusing on HCP and O. We have been early but that is fine as we will continue to add aggressively as the prices languish. We are happy to be a fellow shareholder with you. And let’s face it, we all own what are de minimus amounts of these companies, but we are still owners (another overused public accounting term).
All the best.
FD
FD,
Nice! I love O as well, great moves there. We are still owners and I love the “DM” term that you just used, it’s awesome! Pumped that you are a fellow public accountant… haha
Keep on piling the money to assets such as these – making our money work for us is the name of the game!
-Lanny
Hey Lanny,
Nice purchase!
I’m looking at HCP and OHI.
not sure yet which one I Choose next week.
Which one do you like?
Cheers,
Pollie
Pollie,
Phew, tough call here. I like both? haha anyway you could split them up and diversify the risk a little bit? Thoughts?
-Lanny
Lanny,
Virtual “high 5” Great stock, great price, great dividend! Keep playing the game to win! Speaking of winning games, now that the Rockets are out I’ll be pulling for the Cavs to get it done!
MDP
MDP,
Words cannot describe the comment you made about…. THE CAVS!! Cannot wait for the finals, sucks about the time for me though, eastsiders are going to be staying up late, that’s for sure. Ready for Thursday? Countdown has been on…
Thanks again on the stock – loving the prices lately on a few and decided to pull it on this one. Making moves.
-Lanny
Nice buy! It was between BNS and HCP for me last week and I went with BNS merely because I didn’t have a position in it yet, will still be looking to add more HCP in the future. Its dividend growth has slowed over the years but it is a steady presence in the REIT sector and I don’t expect healthcare to be slowing down at all any time soon as the American population ages.
Dan,
Nice purchase with BNS, Canadian bank powerhouse! Loving it.
For a REIT and within the healthcare sector – like the odds of a higher yield in an industry that doesn’t show signs of slowing, eh?
-Lanny
Wow great purchase at a great price! I like HCP a lot especially hitting a 52 week low.
My apologies for my last comment, I thought you were the one getting married, I misinterpret your post. English is my second language and I had to read it the second time after your comment.
I agree with MDP above, I think LeBron will take the ring this year. Warriors is a young team with lots of intensity but I will go to the Cavs especially during crucial plays. Who’s your pick?
FTFF,
Thanks for the post! It’s okay on the earlier comment. You’re fine, don’t ya worry!
I hope SO bad that Cleveland has it… I want the Cavs and WE WILL DO WHATEVER IT TAKES TO WIN!!! I cannot wait for the series to start!
Thank you so much for the post and hope you enjoy the game as much as I will!
-Lanny
Awesome Purchase Lanny. Fricken Awesome! Value investing baby!! 🙂 I’m happy for you and congrats on adding 99.44 to the Lanny Dividend Income Corporation. Keep it up and always a pleasure my friend. Cheers to us!!
Hustler,
The man of motivation! It’s cool to see that a purchase can add $100 essentially to the overall projection. Currently working on bundling up some capital for the next deployment, definitely excited for June, the market is playing well in our favor – especially for such a big dividend paying month for most of us. Thanks again DH, lets keep it moving!
-Lanny
Awesome purchase Lanny. HCP has been on my watch list for a while now but haven’t pulled the trigger.
Tawcan,
Thanks for coming by! I’ve been monitoring it and if I bought it earlier in the year with a much lower dividend, why wouldn’t I want to buy a valued company at a discounted price with a dividend that’s increased since the last time I bought? Buy button was pressed! Keep us posted if you make a move.
-Lanny
What can I say except that I like this buy. I just added the large health REITs to my IRA not long ago and am watching closely to see when I can add some more to my VTR, HCN and HCP. These REITs are stillon my buy list for June though rank below my Canadian banks for now. Thanks for sharing.
DH,
I appreciate your comment! HCN/HCP/OHI have been the 3 that I’ve seen purchased lately. Also – Canadian banks still do look attractive! No doubt about that in my mind. Fun to add a high yielding REIT to a retirement vehicle I may say! Thank you again.
-Lanny
Good purchase! I personally prefer a higher growth rate than a higher yield, but of course we can’t look at REITs exactly the same way.
Cheers,
Mike
DG,
Thanks – REITs are always a different “little arena” as you stated, it fits in my ROTH I would say decently well considering the tax benefit in there, as well as the roth having a lower overall yield in general, therefore – this purchased gave it a little “smidge” up. Like that they’ve consistently grown the dividend, as well as the industry + obviously the nice yield to boot!
-Lanny
Good buy! Seems like quite a few bloggers are buying HCP around now. I prefer VTR and OHI in the healthcare REIT space, but all three are top-notch. Also picked up some DLR and STAG today, because I agree that REITs in general are becoming appealing.
DD,
Thanks for the post. Nice work with DLR – I know a few that have been scooping them up, as well as OHI big time. REITs are looking nice and it’s hard to tell when is the best time – but hey if it’s a valuable company, “just do it”, right?
-Lanny
“I made a poultry purchase of $258 earlier this year”
I think you meant ‘paltry’. Unless of course you got an awesome deal on some chicken, in which case, never mind. 🙂
Kurt,
Thank you! Spell correct, kills me every time, just when they think I wasn’t using the “right” meaning… thanks for the catch and am going back to update!
-Lanny
Interesting purchase, Lanny. I just finished looking into the company and looks like folks are still very concerned about the HCR Manor issue. But I think it could be a good buying opportunity while ppl are skeptical of the company.
Best wishes
R2R
Great purchase Lanny. We recently added 100 shares of HCP to our portfolio based on many of the reasons you outlined in this post. Pleased to have you as a fellow shareholder.