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I am a private investor who has invested in individual stocks for over a decade. I have a BBA from the University of Texas at Austin. I am retired and living off of dividends and distributions from a portfolio of BDCs, consumer staple stocks, MLPs, regional banks and REITs.
  • Health Care REITs Update Of 3-14-14 0 comments
    Mar 16, 2014 5:55 PM

    This is part three of the dividend to earnings - or in the case FFO - series. And this is the sector where there are lots of atypical valuations.

    Health Care Update for Q1-14

    Yields are calculated on Q1-14 dividends. HCN has announced a February increase in the dividend to $0.795/share - OHI an increase to $0.49/share - SBRA an increase to $0.36 - MPW increased to $0.21/share. The Dividend/FFO ratio uses the 2014 FFO projection. AVIV started trading on 3-21-13 and DOC on 7-19-13. The sector average LTM (last twelve month) dividend change omits AVIV and DOC from that calculation. VTR has atypically had two dividend increases in the LTM. NHI has already announced an increase to $0.77 in its Q2-14 dividend.


      Share Price 2014 FFO Estimate   Div/ Percent Change LTM
    Company_name_and_ticker 1-01 03-14 1-01 03-14 Yield FFO Price Pr+Div 14 FFO Target Div

    Aviv REIT (NYSE:AVIV) 23.70 24.97 1.85 1.82 5.77 79.12 5.36 6.88 -1.62 0.38 0.00
    Physicians Realty (NYSE:DOC) 12.24 13.15 0.98 0.95 6.84 94.74 7.43 9.27 -3.06 0.82 0.00
    Health Care REIT (NYSE:HCN) 53.57 58.93 4.00 4.02 5.40 79.10 10.01 11.49 0.50 -4.17 3.92
    Health Care Prop (NYSE:HCP) 36.32 37.16 3.06 3.02 5.87 72.19 2.31 3.81 -1.31 -5.45 3.81
    Health Care Realty (NYSE:HR) 21.31 23.93 1.41 1.45 5.01 82.76 12.29 13.70 2.84 -3.81 0.00
    Health Care Trust (NYSE:HTA) 9.84 11.63 0.69 0.72 4.94 79.86 18.19 19.65 4.35 0.00 0.00
    LTC Property (NYSE:LTC) 35.39 37.93 2.65 2.63 5.38 77.57 7.18 8.14 -0.75 0.00 9.68
    Med Prop Trust (NYSE:MPW) 12.22 12.70 1.12 1.12 6.61 75.00 3.93 5.65 0.00 -0.68 5.00
    Nat'l Health Inv (NYSE:NHI) 56.10 61.01 4.13 4.08 4.82 72.06 8.75 10.06 -1.21 0.79 9.70
    Omega Health (NYSE:OHI) 29.80 32.94 2.73 2.74 5.95 71.53 10.54 12.18 0.37 -4.62 8.89
    Sabra Health Care (NASDAQ:SBRA) 26.14 27.53 2.20 2.27 5.23 63.44 5.32 6.69 3.18 3.30 5.88
    Senior Housing (NYSE:SNH) 22.23 22.54 1.74 1.76 6.92 88.64 1.39 3.15 1.15 -2.95 0.00
    Universal Health (NYSE:UHT) 40.06 42.39 2.80 2.83 5.90 88.34 5.82 5.82 1.07 0.00 0.81
    Ventas (NYSE:VTR) 57.28 60.76 4.36 4.36 4.77 66.51 6.08 6.08 0.00 -5.87 8.21

    Average           5.67 77.92 7.47 8.76 0.39 -1.59 4.66

    Dividend dates are:

    AVIV: 01-17-14 DOC: 02-06-14 HCN: 02-19-14 HCP: 02-24-14 HR : 02-27-14 HTA: 04-02-14 LTC: monthly
    MPW: 04-10-14 NHI: 05-08-14 OHI: 02-17-14 SBRA: 02-27-14 SNH: 02-20-14 UHT: 12-30-13 VTR: 03-27-14

    Historical yields for the sector:

    Mar 2005: 6.99% June: 6.09% Sept: 6.22% Dec: 6.73%
    Mar 2006: 6.18% June: 6.79% Sept: 5.85% Dec: 5.28%
    Mar 2007: 5.33% June: 6.24% Sept: 5.90% Dec: 5.77%
    Mar 2008: 5.84% June: 6.33% Sept: 5.25% Dec: 6.89%
    Mar 2009: 9.11% June: 7.88% Sept: 6.67% Dec: 6.31%
    Mar 2010: 6.67% June: 6.09% Sept: 5.62% Dec: 5.75%
    Mar 2011: 5.48% June: 5.64% Sept: 6.02% Dec: 5.34%
    Mar 2012: 5.16% June: 4.84% Sept: 4.89% Dec: 4.69%
    Mar 2013: 4.66% June: 5.09% Sept: 5.49% Dec: 6.02%
    Mar 2014: June: Sept: Dec:
    Health Care Price/FFO Ratios 03-14

    The analyst projected FFO stats for UTH that I find at Yahoo Finance look bad to me. Those projections are not in line with what UHT is reporting. This date uses a 2014 FFO projection that is a run rate based on current trends. HTA IPOed in June of 2012. 'Normalized FFO' stats for the pre-IPO years came from its 2011 10-K. When AVIV and DOC were added to the sector on 11-19-13, the sector average 2013 price/FFO ratio rose from 14.94 to 15.79. The DOC FFO projection fell 50%, distorting the 2013 sector ratio. 2012 FFO growth was 10.77% and 2013 growth was 7.65% before the addition of the newbies. AVIV and DOC do not distort the 2014 and 2015 sector average ratios.


      FFO / Share % FFO Growth Price/FFO 14 FFO Range
    Co. 2010 2011 2012 2013 2014 2015 12-13 13-14 14-15 2013 2014 2015 High Low Range

    AVIV 0.00 0.00 0.00 1.26 1.82 2.00 na 44.44 9.89 19.82 13.72 12.48 190 152 20.88%
    DOC 0.00 0.00 0.00 0.26 0.95 1.17 na 265.38 23.16 50.58 13.84 11.24 106 83 24.21%
    HCN 3.13 3.41 3.51 3.36 4.02 4.23 -4.27 19.64 5.22 17.54 14.66 13.93 410 397 3.23%
    HCP 2.19 2.69 2.76 3.01 3.02 3.14 9.06 0.33 3.97 12.35 12.30 11.83 310 296 4.64%
    HR 1.29 1.15 1.31 1.32 1.45 1.56 0.76 9.85 7.59 18.13 16.50 15.34 148 139 6.21%
    HTA 0.38 0.51 0.61 0.64 0.72 0.77 4.92 12.50 6.94 18.17 16.15 15.10 75 70 6.94%
    LTC 1.88 2.15 2.26 2.37 2.63 2.83 4.87 10.97 7.60 16.00 14.42 13.40 269 258 4.18%
    MPW 0.66 0.71 0.90 0.96 1.12 1.19 6.67 16.67 6.25 13.23 11.34 10.67 114 109 4.46%
    NHI 2.76 2.88 3.18 3.55 4.08 4.28 11.64 14.93 4.90 17.19 14.95 14.25 414 402 2.94%
    OHI 1.61 1.89 2.19 2.53 2.74 2.80 15.53 8.30 2.19 13.02 12.02 11.76 279 270 3.28%
    SBRA 0.00 1.31 1.41 1.84 2.27 2.41 30.50 23.37 6.17 14.96 12.13 11.42 241 219 9.69%
    SNH 1.70 1.73 1.75 1.69 1.76 1.84 -3.43 4.14 4.55 13.34 12.81 12.25 181 154 15.34%
    UHT 2.61 2.57 2.84 2.77 2.83 2.89 -2.46 2.17 2.12 15.30 14.98 14.67 283 283 0.00%
    VTR 2.85 3.37 3.80 4.14 4.36 4.58 8.95 5.31 5.05 14.68 13.94 13.27 445 420 5.73%

    Average           6.89 31.29 6.83 18.16 13.84 12.97

    Historical Price/FFO ratios for the sector:

    Mar 2007: 15.23 June: 13.19 Sept: 14.18 Dec: 14.55
    Mar 2008: 14.17 June: 13.27 Sept: 15.95 Dec: 12.38
    Mar 2009: 9.42 June: 10.84 Sept: 12.61 Dec: 13.90
    Mar 2010: 12.61 June: 14.10 Sept: 15.45 Dec: 15.41
    Mar 2011: 15.07 June: 14.62 Sept: 12.91 Dec: 14.95
    Mar 2012: 14.21 June: 15.25 Sept: 15.05 Dec: 15.82
    Mar 2013: 17.18 June: 15.84 Sept: 15.21 Dec: 16.67

    The relationship between the Dividend/FFO ratio and yields: This is the same kind of test done above. The Q1-14 dividend to 2014 consensus FFO projection ratio is used for this test.
    Div/FFO ratios of less than 73%: HCP, LTC, NHI, OHI, SBRA and VTR. Their current average yield is 5.34% and their average price/FFO ratio is 13.29.
    Div/FFO ratios between 73% and 84%: HCN, HR, HTA and MPW. Their current average yield is 5.49% and their average price/FFO ratio is 14.66.
    Div/FFO ratios of more than 84%: SNH and UHT. Their current average yield is 6.41% and their average price/FFO ratio is 13.89.

    Read the above data slowly - notice that the price/FFO's for the high dividend/FFO group is higher than the price/FFO's for the lower dividend/FFO group. The data below supports the expectation that the low dividend/FFO group is also has the faster growing dividends. These valuations are out of kilter with the expected valuations. That takes a good bit of explanation. And that explanation will be in my upcoming article on Health Care REITs (but those who have read my prior SA writings already know the answer).

    The relationship between Dividend Growth Inertia and yields: This is the same kind of test done above. but the LTM (last twelve months) dividend growth is used for this test.
    The following had Last Twelve Month dividend growth of more than 4.5%: LTC, MPW, NHI, OHI, SBRA and VTR. Their current average yield is 5.46% and average CAGR projection is 5.10%.
    The following had Last Twelve Month dividend growth between 1% and 4.5%: HCN and HCP. Their current average yield is 5.63% and average CAGR projection is 4.10%.
    The following had Last Twelve Month dividend growth of less than 1%: HR, HTA, SNH and UHT. Their current average yield is 5.69% and average CAGR projection is 2.45%.

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