Welltower Inc. (NYSE:HCN) is engaged in the transformation of healthcare infrastructure. The Company invests in seniors housing operators, post-acute providers and health systems to improve people's wellness and overall health care experience. On February 18, 2016, the company reported fourth quarter funds from operations of $1.13per share which beat analyst estimates by $0.01. In the past year the company's stock is down 15.4% and is losing to the S&P 500, which has lost 3.4% in the same time frame.
I bought the stock for the steady dividend portion of my portfolio and recently the company has done nothing since March started. It is with this bit of news I feel that it is important to evaluate the company on a fundamental, financial, and technical basis to see if it's worth adding additional shares to my portfolio.
The company currently trades at a trailing 12-month P/E ratio of 43.48, which is expensively priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1-year forward-looking P/E ratio of 30.83 is currently expensively priced for the future in terms of the right here, right now. The 1-year PEG ratio (3.34), which measures the ratio of the price you're currently paying for the trailing 12-month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1-year horizon), tells me that the company is expensively priced based on a 1-year EPS growth rate of 13.01%. The company has great near-term future earnings growth potential with a projected EPS growth rate of 13.01%. In addition, the company has great long-term future earnings growth potential with a projected EPS growth rate of 13.1%.
On a financial basis, the things I look for are the dividend payouts, return on assets, equity and investment. The company pays a dividend of 5.14% with a payout ratio of 223% of trailing 12-month earnings while sporting return on assets, equity and investment values of 3%, 6%, and 4%, respectively, which are all respectable values. Because I believe the market may get a bit choppy here and would like a safety play, I believe the 5.14% yield of this company is good enough alone for me to take shelter in for the time being. The company has been increasing its dividends for the past thirteen years at a 5-year dividend growth rate of 3.8%.
Click to enlargeLooking first at the relative strength index chart [RSI] at the top, I see the stock dropping from over bought territory with a current value of59.47relative to the rest of the market. I will look at the moving average convergence-divergence [MACD] chart next. I see that the black line is crossing below the red line with the divergence bars decreasing in height which tells me bearish momentum just started in the name. As for the stock price itself ($66.96), I'm looking at$71.93to act as resistance and the 200-day moving average (currently $64.25)to act as support for a risk/reward ratio which plays out to be -4% to7.4%.
Fundamentally I believe the company to be expensively valued now on next year's earnings estimates and on earnings growth expectations with great near- and long-term earnings growth expectations. Financially the company pays a phenomenal dividend. On a technical basis the risk/reward ratio shows me there is more reward than risk right now. Because I believe immediate risk is to the downside I've written covered calls against the name and so far it has worked out in my favor .
Disclaimer: This article is in no way a recommendation to buy or sell any stock mentioned. This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!
Disclosure: I am/we are long 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.