I was looking for income replacement having sold Kinder Morgan (NYSE:KMI) and trimming Conoco Phillips (NYSE:COP), both high yield dividend paying stocks. The sweet REIT sector and its higher yields called to me, as they can also offer nice dividend growth. I have also been wanting to add to my Healthcare sector, so this seemed like the right place to look.
National Health Investors (NYSE:NHI) called first. It is a 13-year dividend contender and on the C-C-C list produced by David Fish. More later on NHI. I already own significant positions in Omega (NYSE:OHI), Ventas (NYSE:VTR), HCP (NYSE:HCP), and a smaller position in Care Capital (NYSE:CCP), the spin-off from VTR. They are all in the healthcare equity REIT sector. Therefore, I was looking for something new. I did also add to OHI as it had become a great bargain recently @ $30.99 and I have trouble resisting bargains in stocks that I like and already own.
I would also like to mention, I have owned many single entity drug companies in the past and was disappointed with the poor dividend growth and sometimes frozen dividends. Those included, Merck (NYSE:MRK), Lilly (NYSE:LLY), Pfizer (NYSE:PFE) and Bristol-Myers (NYSE:BMY). BMY has now become a growth stock and I sold it for nice capital gains. I am also considering medical supplier Becton Dickinson (NYSE:BDX), but have not decided as yet if I will purchase it.
As my portfolio is down from 74 stocks to 73 now, even after these 2 new purchases, I want to keep to my 2016 goal of not increasing my holdings.
My NEW Purchases
National Health Investors:
Healthcare eREIT operating in 31 states and owning 188 properties, 62% is senior housing and discretionary, 34% medical and includes 18500 medical beds. No S&P credit rating, but 49% Debt/cap with 7% 5year DGR. It currently is @ $60.50 and 5.6% yield. Note: REITs are measured by AFFO/ Adjusted Funds From Operations and not P/E. P/AFFO is 14.5 and 5 year = 16, 10 yr 14.8. AFFO growth rate ~8%. All information is from FAST graphs; I have shown the 10-year.
Brad Thomas wrote this very informative article in November 2015, and it got my attention. He called it a blue light special, selling @ $59.10 and 5.8% yield. It fell to this nice price level, having been somewhat over valued for about the last 3 years with a yield in the 4% range. I started a rather small position since the credit rating is not established. It still is trading at an attractive price and 5.6% yield. It is on the Dividend Contender list with 13 years of increased payments, however, here it looks like a pause in 2008-9.
Healthcare eREIT owning 1414 facilities in the US, Canada and the UK. S&P credit rating of BBB.
It recently raised the dividend by 4.2% and has ~4% 5-year DGR. Current A/AFFO is 16.1 compared to a 5-year normal of 17.6. It has a price of $62.22 and a yield of 5.2% at the old dividend rate. The new quarterly dividend of $0.86 is to be paid February 22nd to those stock holders on record as of February 9th, it will then offer a yield of 5.5%. It gets high marks in this article from Brad. It was selling @ $67.77 at that time and is even a better SWAN price. It did freeze the dividend in 2008-9, but has never decreased it.
If you are looking for some income with an interesting and relatively stable dividend history, these are worthwhile candidates for your due diligence. I believe HCN will be the next challenger for the Fish list.
Disclosure: I am/we are long NHI AND HCN.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.