Today I bought shares of HCP, Inc. (HCP), a real estate investment trust (REIT) that has a diversified portfolio of healthcare properties. I wrote about HCP in a recent article at Seeking Alpha shortly before starting a position in the stock last week. The sell-off among REITs continued in a strong way this week, giving me a nice opportunity to average down on my nascent position.
I bought 40 shares of HCP at the price of $39.25 per share plus commission, giving me a 5.33% yield on cost. At the current dividend rate, I can expect to receive quarterly dividends of $21.00 from this purchase, which will add a total of $84.00 to my annual dividend income. My forward 12-month dividend total increases to $2,671. As I mentioned above, this purchase allowed me to average down, lowering my cost basis by 3.3% and raising my overall yield on cost to 5.17%. I now hold a total of 75 shares of HCP in my Roth IRA, which will provide me with quarterly dividends of $39.38.
I am satisfied with the size of my HCP position (portfolio weight of 3.3%), so I will not be looking to buy more shares anytime soon. However, I am closely watching other REITs and would like to diversify by adding a non-healthcare REIT to my portfolio. The most likely candidate is Realty Income (O), which has finally fallen back down into fair value territory. I lack sufficient cash for additional purchases this month, though, so I will have to wait and see where things stand in September.
I don't mind sitting on the sidelines for a bit because the workload at my new job is ratcheting up. The semester does not start until next week, but I already find myself very busy with a variety of things to do. Once the semester actually starts, things will probably get worse and my time will be even more constrained. As a result, I will likely be silent on the blogging front until my next monthly review.
Friday, August 16, 2013
Milestone: $300 in Dividends in a Single Month
It was in December 2012 that I reached the milestone of getting over $200 in dividends in a single month. Not surprisingly, due to quarterly payment schedules I also hit that mark in March and June of this year. Thanks to a cluster of dividend payments yesterday and a massive dividend from VOD about a week ago, I have now received over $300 in dividends in August. This represents another important milestone on my road to building a sustainable and rising stream of dividend income.
Sticking with $100 increments, my next monthly dividend income milestone is $400. It is difficult to predict when I might reach it, but August 2014 seems most probable at this time.
Milestone history for dividends in a single month:
Sticking with $100 increments, my next monthly dividend income milestone is $400. It is difficult to predict when I might reach it, but August 2014 seems most probable at this time.
Milestone history for dividends in a single month:
- $100: March 2012
- $200: December 2012
- $300: August 2013
Tuesday, August 13, 2013
Milestone: Portfolio Value Reaches $90,000
Today my portfolio's value reached $90,000 for the very first time, closing at $90,823.42. It occurred as a result of another contribution to my Roth IRA, in preparation for another possible purchase this month. This milestone comes five months after reaching $80,000 in March. My secondary investing goal is to achieve a satisfactory total return on my investments, and a steadily increasing portfolio value is an indication of progress toward that goal. (Of course, the regular addition of new capital also helps!)
The next milestone is a big one: $100,000. Depending on how stocks perform over the next few months and the amount of new capital I am able to invest, I might be able to reach it by the end of the year. If not, then I should definitely get there in early 2014.
Edit: Here is the milestone history for portfolio value:
The next milestone is a big one: $100,000. Depending on how stocks perform over the next few months and the amount of new capital I am able to invest, I might be able to reach it by the end of the year. If not, then I should definitely get there in early 2014.
Edit: Here is the milestone history for portfolio value:
- $50,000: March 2012
- $60,000: September 2012
- $70,000: January 2013
- $80,000: March 2013
- $90,000: August 2013
Friday, August 9, 2013
Stock Bought: HCP
Yesterday I bought shares of HCP, Inc. (HCP), a real estate investment trust (REIT) that has a diversified portfolio of healthcare properties. I provided some quantitative data on HCP in a comparison of healthcare REITs that I posted earlier this week. Instead of posting a brief analysis of the stock here, I decided to try something different and wrote an article about HCP for Seeking Alpha that was published today.
I bought 35 shares of HCP at the price of $41.80 per share plus commission, giving me a 5.00% yield on cost. (I set my limit price specifically to get that yield on cost.) At the current dividend rate, I can expect to receive quarterly dividends of $18.38 from this purchase, which will add a total of $73.52 to my annual dividend income. My forward 12-month dividend total increases to $2,587. The stock went ex-dividend at the start of August, so I will not receive my first dividend payment until November. This purchase was made in my Roth IRA, which is a particularly good place for holding a REIT because the dividends would be taxed as ordinary income in my taxable account. I funded the purchase by contributing $1,400 to my Roth IRA, much of which came from the moving expense reimbursement I received earlier this week.
I am glad that my portfolio finally has some exposure to real estate. I will be continuing to explore this sector, with the goal of eventually owning a diversified group of 3-5 REITs that specialize in different categories. I have not yet decided what I will buy next for my portfolio, but funds have become available for another purchase. Yesterday I received my moving-related salary supplement, about half of which will soon become new capital for investment. Depending on what opportunities I see, I might make two purchases this month!
Personal update: The delayed paperwork needed to officially start my new job (see my July review) has finally been approved and should be delivered next week, which is great news.
I bought 35 shares of HCP at the price of $41.80 per share plus commission, giving me a 5.00% yield on cost. (I set my limit price specifically to get that yield on cost.) At the current dividend rate, I can expect to receive quarterly dividends of $18.38 from this purchase, which will add a total of $73.52 to my annual dividend income. My forward 12-month dividend total increases to $2,587. The stock went ex-dividend at the start of August, so I will not receive my first dividend payment until November. This purchase was made in my Roth IRA, which is a particularly good place for holding a REIT because the dividends would be taxed as ordinary income in my taxable account. I funded the purchase by contributing $1,400 to my Roth IRA, much of which came from the moving expense reimbursement I received earlier this week.
I am glad that my portfolio finally has some exposure to real estate. I will be continuing to explore this sector, with the goal of eventually owning a diversified group of 3-5 REITs that specialize in different categories. I have not yet decided what I will buy next for my portfolio, but funds have become available for another purchase. Yesterday I received my moving-related salary supplement, about half of which will soon become new capital for investment. Depending on what opportunities I see, I might make two purchases this month!
Personal update: The delayed paperwork needed to officially start my new job (see my July review) has finally been approved and should be delivered next week, which is great news.
HCP, Inc: A Healthcare REIT For My Dividend Growth Machine
A new article of mine has been published on the investing website Seeking Alpha. The article is entitled HCP, Inc: A Healthcare REIT For My Dividend Growth Machine and it provides an overview of HCP, which I purchased yesterday for my dividend growth portfolio.
Wednesday, August 7, 2013
Stock Thoughts: Healthcare REITs
In my search for attractively valued investment opportunities, my attention has been drawn to real estate investment trusts (REITs). I have been interested in diversifying my portfolio and gaining exposure to real estate by investing in REITs, especially those that consistently grow their dividends. However, as a value-oriented dividend growth investor, I would prefer not to pay the premium valuations that the highest quality REITs often command. Fortunately, over the past two months there has been a strong sell-off among REITs, mainly due to fears of rising interest rates when the Federal Reserve tapers its quantitative easing. As a result of the sell-off, many REITs are now trading at attractive valuations, motivating me to look more closely at what is available.
I decided to focus my research on healthcare REITs; that is, companies that own healthcare-related properties such as skilled nursing facilities, senior housing, medical office buildings, and hospitals. A major reason for this decision is that many of these specialties, such as skilled nursing and senior housing, are likely to benefit from the aging population in the U.S. The figure below (taken from an HCP presentation) shows the projected U.S. population growth of individuals 65 years or older until 2050. This strong demographic trend bodes well for healthcare REITs.
Among the 12 healthcare REITs listed by NAREIT, 5 are on the Dividend Champions, Contenders, and Challengers list for having at least 5 consecutive years of dividend growth. These REITs are HCP (HCP), Health Care REIT (HCN), National Health Investors (NHI), Omega Healthcare Investors (OHI), and Universal Health Realty Income Trust (UHT). In the remainder of this post I will compare some quantitative data from these REITs.
Properties: The table below shows the percentages of properties in different categories owned by each REIT.
HCP seems to be the most diversified; HCN, NHI, and UHT are somewhat less diversified, each having at least 50% of their properties in a single category; OHI is the least diversified, being focused almost entirely on skilled nursing.
Dividends: The table below indicates the current dividend yield, the 5-year historic yield (from Morningstar), the payout ratio (based on funds from operations, FFO), the dividend growth streak in years, and the 5-year dividend growth rate (DGR).
All 5 stocks have yields near or above 5%, which is great. However, in each case the current yield is below the historic yield. Even though REITs are required to pay out a high proportion of their net income, it is worthwhile considering their payout ratios. HCP and OHI both have payout ratios below 80%, which provides more of a buffer against an operational decline compared with the others.
HCP and UHT are both Dividend Champions, having increased their dividends for more than 25 consecutive years. In my research I discovered that HCN froze its dividend from mid-2000 to early 2004, NHI cut and then briefly suspended its dividend in 2000 and 2001, and OHI suspended its dividend from 2001 to late 2003. Even though NHI and OHI have re-established decent dividend growth streaks, those past suspensions are worth keeping in mind. Regarding DGRs, OHI has done very well in recent years; HCN and NHI have been decent; HCP and UHT have been weak.
Balance sheets: The table below provides some information about debt and credit (taken from NAREIT) and Value Line safety ratings if available.
NHI has the best debt ratios, whereas HCP has the best credit rating. Long-term debt has increased over the past few years in all cases (not shown in the table), likely due to unusually low interest rates.
Valuations: The table below indicates the current price of each stock (as of August 7, 2013), the P/FFO ratio (which is more appropriate to use for valuing REITs than the P/E ratio), the current and historic P/B values, Morningstar stars and fair value estimates if available, and Dividend Discount Model (DDM) fair value estimates. The DDM estimates used the 5-year DGR and a discount rate equal to the current yield plus the 5-year DGR. The margin of safety (MoS) reflects the percent discount of the current price from the DDM fair value estimate.
Based on P/FFO, one might consider OHI to be moderately undervalued; HCP and UHT to be slightly undervalued to fairly valued; HCN and NHI to be fairly valued to slightly overvalued. Based on P/B, OHI actually appears overvalued (as does NHI), whereas the others seem to be fairly valued. The DDM calculations give a small margin of safety to each stock; given that none of the margins are greater than 10%, it would be conservative to judge all 5 stocks as fairly valued by that measure. Interestingly, if one uses Morningstar's fair value estimate, HCP is undervalued by at least 20%.
Summary: Of the healthcare REITs briefly surveyed here, there are two that I consider to be more attractive investment opportunities than the others: HCP and OHI. Regarding HCP, I like its long dividend growth track record, low payout ratio, relatively high credit rating, fair valuation, and good property diversification; however, I dislike its weak dividend growth rate. It is considered a "blue chip" REIT partly because it is "arguably the best-diversified landlord in healthcare" (according to Josh Peters of Morningstar). Regarding OHI, I like its high current yield, relatively high dividend growth rate, low payout ratio, and fair to undervaluation; however, I dislike its lower credit rating, past dividend suspension, and lack of property diversification. It is considered a "pure play" REIT because of its focus on skilled nursing facilities, offering more risk but possibly more reward than others. Brad Thomas, a REIT industry expert who writes for Seeking Alpha, has favorable opinions on both names and wrote a recent article on OHI.
Thus, if I were to invest in a healthcare REIT, then I would likely choose either HCP or OHI. I have also been looking at non-healthcare REITs. Two of the more popular names among dividend growth investors are Realty Income (O) and Digital Realty Trust (DLR). I consider O to be a well-run blue chip REIT with a solid dividend growth record, but I desire a better valuation. I consider DLR to be undervalued despite strong recent growth, but it has a higher risk/reward ratio than other REITs due to its technology emphasis. I will continue examining these and other names as I explore the REIT space. Note that if I decide to invest in a REIT, then it will likely be in my Roth IRA because REIT dividends would be taxed as ordinary income in my taxable account.
I decided to focus my research on healthcare REITs; that is, companies that own healthcare-related properties such as skilled nursing facilities, senior housing, medical office buildings, and hospitals. A major reason for this decision is that many of these specialties, such as skilled nursing and senior housing, are likely to benefit from the aging population in the U.S. The figure below (taken from an HCP presentation) shows the projected U.S. population growth of individuals 65 years or older until 2050. This strong demographic trend bodes well for healthcare REITs.
Properties: The table below shows the percentages of properties in different categories owned by each REIT.
Dividends: The table below indicates the current dividend yield, the 5-year historic yield (from Morningstar), the payout ratio (based on funds from operations, FFO), the dividend growth streak in years, and the 5-year dividend growth rate (DGR).
HCP and UHT are both Dividend Champions, having increased their dividends for more than 25 consecutive years. In my research I discovered that HCN froze its dividend from mid-2000 to early 2004, NHI cut and then briefly suspended its dividend in 2000 and 2001, and OHI suspended its dividend from 2001 to late 2003. Even though NHI and OHI have re-established decent dividend growth streaks, those past suspensions are worth keeping in mind. Regarding DGRs, OHI has done very well in recent years; HCN and NHI have been decent; HCP and UHT have been weak.
Balance sheets: The table below provides some information about debt and credit (taken from NAREIT) and Value Line safety ratings if available.
Valuations: The table below indicates the current price of each stock (as of August 7, 2013), the P/FFO ratio (which is more appropriate to use for valuing REITs than the P/E ratio), the current and historic P/B values, Morningstar stars and fair value estimates if available, and Dividend Discount Model (DDM) fair value estimates. The DDM estimates used the 5-year DGR and a discount rate equal to the current yield plus the 5-year DGR. The margin of safety (MoS) reflects the percent discount of the current price from the DDM fair value estimate.
Summary: Of the healthcare REITs briefly surveyed here, there are two that I consider to be more attractive investment opportunities than the others: HCP and OHI. Regarding HCP, I like its long dividend growth track record, low payout ratio, relatively high credit rating, fair valuation, and good property diversification; however, I dislike its weak dividend growth rate. It is considered a "blue chip" REIT partly because it is "arguably the best-diversified landlord in healthcare" (according to Josh Peters of Morningstar). Regarding OHI, I like its high current yield, relatively high dividend growth rate, low payout ratio, and fair to undervaluation; however, I dislike its lower credit rating, past dividend suspension, and lack of property diversification. It is considered a "pure play" REIT because of its focus on skilled nursing facilities, offering more risk but possibly more reward than others. Brad Thomas, a REIT industry expert who writes for Seeking Alpha, has favorable opinions on both names and wrote a recent article on OHI.
Thus, if I were to invest in a healthcare REIT, then I would likely choose either HCP or OHI. I have also been looking at non-healthcare REITs. Two of the more popular names among dividend growth investors are Realty Income (O) and Digital Realty Trust (DLR). I consider O to be a well-run blue chip REIT with a solid dividend growth record, but I desire a better valuation. I consider DLR to be undervalued despite strong recent growth, but it has a higher risk/reward ratio than other REITs due to its technology emphasis. I will continue examining these and other names as I explore the REIT space. Note that if I decide to invest in a REIT, then it will likely be in my Roth IRA because REIT dividends would be taxed as ordinary income in my taxable account.
Sunday, August 4, 2013
Monthly Review: July 2013
July was a transitional time in my life. At the start of the month I moved into my new apartment and I spent the first week unpacking, running errands, getting things set up, and buying stuff. I'm pretty much settled into my new home now. Even though I have not officially started my new job at the university yet, I have been voluntarily going into work on a regular basis for the past three weeks to make various preparations for when the fall semester starts. The more I do now, the less the burden will be once I am busy teaching and doing research. Due to an administrative mistake, my official start date has been postponed until mid-August, which means I will continue to be unpaid for the time being. I am not happy about the delay, but there is nothing that can be done about it. Aside from that, my transition has gone well.
On the investing front, here is a review of what happened in July:
Dividends: I received a total of $130.61 in dividends from 7 stocks, as indicated on my Dividends page. This represents a 9.3% increase compared with the same month a year ago. My year-to-date dividend total is now $1,200.66.
Dividend Increases: I was pleased to see dividend increases announced for the following stocks (click on each stock to see my post about the increase): Thus far this year, there have been dividend increases for 20 of the 28 stocks in my portfolio. The mean increase has been 10.3%.
Savings: I had no savings in July because I had no job income. Of course, I still had expenses (which were above average due to my move), and they were covered by savings from previous months, as planned. Given that my new job will not start until mid-August (see above) and this is an unusual, one-time situation, I will be excluding July and August from my savings rate calculations for 2013.
Transactions: After a four-month hiatus, I finally bought a stock (click on the transaction to see my post about it): This purchase was made in my taxable account by combining $700 in new capital with $900 in dividends that had accumulated over the last few months. The purchase will increase my annual dividend income by $64.00. My forward 12-month dividend total is now $2,503.
Portfolio: My portfolio (taxable account and Roth IRA together) currently consists of 28 stocks and has a market value of $87,502.36 (including cash), which is a 4.2% increase over last month's value. About 3/4 of the increase reflected capital gains during the month.
Seeking Alpha: This month I published one new article on the investing website Seeking Alpha: It received over 10,000 pageviews. I earned $112.01 from pageviews in July, increasing my year-to-date total to $830.32. In mid-July I also received my Q2 payment of $284.36, which partly compensated for my lack of job income.
Looking Ahead: My dividend total will be much higher in August than in July. Dividend increases from ITW and UNP were announced at the start of August; I am not expecting any other increases during the month. Even though I will not receive any income from my new job until the end of August (at the earliest), I am hoping that I will get my moving expense reimbursement soon. I plan to use a portion of it to make a partial contribution to my Roth IRA. If that happens in a timely manner, then I should be able to make a single purchase in August, provided I find a good investment opportunity.
On the investing front, here is a review of what happened in July:
Dividends: I received a total of $130.61 in dividends from 7 stocks, as indicated on my Dividends page. This represents a 9.3% increase compared with the same month a year ago. My year-to-date dividend total is now $1,200.66.
Dividend Increases: I was pleased to see dividend increases announced for the following stocks (click on each stock to see my post about the increase): Thus far this year, there have been dividend increases for 20 of the 28 stocks in my portfolio. The mean increase has been 10.3%.
Savings: I had no savings in July because I had no job income. Of course, I still had expenses (which were above average due to my move), and they were covered by savings from previous months, as planned. Given that my new job will not start until mid-August (see above) and this is an unusual, one-time situation, I will be excluding July and August from my savings rate calculations for 2013.
Transactions: After a four-month hiatus, I finally bought a stock (click on the transaction to see my post about it): This purchase was made in my taxable account by combining $700 in new capital with $900 in dividends that had accumulated over the last few months. The purchase will increase my annual dividend income by $64.00. My forward 12-month dividend total is now $2,503.
Portfolio: My portfolio (taxable account and Roth IRA together) currently consists of 28 stocks and has a market value of $87,502.36 (including cash), which is a 4.2% increase over last month's value. About 3/4 of the increase reflected capital gains during the month.
Seeking Alpha: This month I published one new article on the investing website Seeking Alpha: It received over 10,000 pageviews. I earned $112.01 from pageviews in July, increasing my year-to-date total to $830.32. In mid-July I also received my Q2 payment of $284.36, which partly compensated for my lack of job income.
Looking Ahead: My dividend total will be much higher in August than in July. Dividend increases from ITW and UNP were announced at the start of August; I am not expecting any other increases during the month. Even though I will not receive any income from my new job until the end of August (at the earliest), I am hoping that I will get my moving expense reimbursement soon. I plan to use a portion of it to make a partial contribution to my Roth IRA. If that happens in a timely manner, then I should be able to make a single purchase in August, provided I find a good investment opportunity.
Friday, August 2, 2013
Blog Reaches 100,000 Pageviews
Today my blog reached a notable milestone:
That's a pretty good number, considering that I started this blog in January 2012. Most of the pageviews are from this year, due to a sudden and sustained increase in daily pageviews from the start of 2013. The current average is around 350 pageviews per day. It's motivational to see that others are interested in my investing thoughts and activities. I appreciate the feedback I get through comments and I thank everyone who reads my blog.
With recent events in my life (namely, my big move and starting a new job), I find that I have limited time for investing-related activities nowadays, but I will do what I can to regularly update this blog and keep it informative. Onward to 200,000 pageviews!
That's a pretty good number, considering that I started this blog in January 2012. Most of the pageviews are from this year, due to a sudden and sustained increase in daily pageviews from the start of 2013. The current average is around 350 pageviews per day. It's motivational to see that others are interested in my investing thoughts and activities. I appreciate the feedback I get through comments and I thank everyone who reads my blog.
With recent events in my life (namely, my big move and starting a new job), I find that I have limited time for investing-related activities nowadays, but I will do what I can to regularly update this blog and keep it informative. Onward to 200,000 pageviews!
Dividend Increase: ITW
Illinois Tool Works (ITW) is increasing its quarterly dividend by 10.5%, from $0.38 to $0.42 per share, putting the company on track for its 39th consecutive year of dividend growth (news release). Given that I own 40 shares of ITW, my quarterly dividend increases from $15.20 to $16.80 and my yield on cost becomes 3.93%. The extra $6.40 in annual dividend income raises my forward 12-month dividend total to $2,514. Thus far this year, there have been dividend increases for 21 of the 28 stocks in my portfolio.
Thursday, August 1, 2013
Dividend Increase: UNP
Union Pacific (UNP) is increasing its quarterly dividend by 14.5%, from $0.69 to $0.79 per share (news release). A previous increase was announced in November 2012 but was effective with the January 2013 payment, so this is the second increase that takes effect in 2013. Given that I own 10 shares of UNP, my quarterly dividend increases from $6.90 to $7.90 and my yield on cost becomes 2.99%. The extra $4.00 in annual dividend income raises my forward 12-month dividend total to $2,507. Thus far this year, there have been dividend increases for 20 of the 28 stocks in my portfolio. (UNP had already been included in the total due to its previous increase.)
Subscribe to:
Posts (Atom)