LTC Properties: This 4% Yielding Healthcare REIT Is Getting Expensive

Jun. 17, 2016 12:59 PM ETLTC Properties, Inc. (LTC)6 Comments
Achilles Research profile picture
Achilles Research


  • LTC Properties' shares hit a new 52-week high two days ago.
  • The REIT's shares are selling for ~19x Q1-16 run-rate AFFO, are now overbought, too.
  • Investors may want to wait for a market correction before buying this healthcare REIT.
  • An investment in LTC yields 4.33 percent.

Healthcare REITs are my favorite REIT sub-sector right now. The population in the U.S. is aging, and life expectancies are rising... all of which makes for a fantastic investment opportunity over the long haul: Growing demand for senior healthcare. Skilled nursing facilities, senior living communities, and hospitals are all going to profit from a growing share of elderly in our society. Healthcare REITs exploit this growth opportunity and are aggressively investing in a portfolio of healthcare-related properties.

One healthcare REIT that is doing that is LTC Properties, Inc. (NYSE:LTC), and the company has built a national presence over the last couple of years. LTC Properties runs a portfolio of skilled nursing, assisted living, and range of care properties.

LTC Properties has made a substantial commitment to growing its real estate portfolio and expanding geographically, and invested more than a billion dollars in its growth.

Valuation Is Key

I have covered LTC Properties a few times here on Seeking Alpha, most recently two months ago, but I think the REIT's share price has now reached a level at which buying the company may not be so beneficial over the long haul.

In my last piece on LTC Properties, entitled "LTC Properties: This 5% Yielding Monthly Dividend Payer Is Worthy Of Attention", I contended that quality has its price. Higher-quality REITs with clear dividend visibility should sell for higher multiples than REITs that have not yet earned that reputation yet. That being said, though, valuation is always a key concern for REIT and income investors.

LTC Properties said in May that its first quarter normalized adjusted funds from operations hit ~$24.7 million, up ~19 percent from the first quarter a year ago. On a per-share basis, LTC Properties raked in $0.66 compared to $0.58 a year ago. On a run-rate basis, therefore, LTC Properties' shares are selling for ~19x adjusted funds from operations.

This article was written by

Achilles Research profile picture
I am a dividend investor and look for undervalued investments in the stock market. I identify misunderstood and undervalued equity investments and hold those securities until their price approximates my estimate of intrinsic value. I am a long-term investor only. I am building a $100,000 high-yield income portfolio. I am running this portfolio as an experiment to see if long-term sustainable income can be generated from a diversified pool of high-risk, high-yield securities. I am willing to accept high risk in order to meet my performance goals.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.

Recommended For You

Comments (6)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.