Monday, July 20, 2015

Recent Buy: Ventas



On Monday July 20, 2015, I added 16 shares of Ventas at $64.00/share to my taxable account. I'm doubling down on my earlier conviction. 

Rationale:

1) here is Roadmap2retire's article on seeking alpha article

2) Constant FFO growth, constant dividend growth, and the payout ratio is actually going down.


3) Increasing Healthcare cost 

 
4) Increasing aging population 


5) Increasing number of insured people under the ACA. 


6) But I am more interested in their Hospital assets. Many of my co-workers have stated that their doctors are doubling or sometime tripling their appointments. Meaning 2-3 people are scheduled for the same doctor at the same time. After Ardent, I see Ventas making further move in the hospital business. I believe a bubble will be created from the elderly care sector. Once all the boomers are gone, will the OHI, LTC, etc's facilities be replenished with generation X? Will there be that many gen X to fill up all the facilities? I don't know. It's nice to have diversification and not have all your eggs in one basket.  


7) Spinoff. Ventas is spinning off its skilled nursing facilities. I had an interesting talk with a few boomers co-workers the other day. Some have 401ks and pensions to live off but many do not. I asked them how they will survive after 65. Many said they were going to fake illnesses or dementia to enter long term care or skilled nursing facilities. Apparently, medicare will cover these two and will also cover senior housing if staying at a senior housing was due to some medical sickness. I'm not going to argue the ethics of this but their plans do work...Ventas is going to have a huge tailwind.   


8) Fundamentals 
  • Debt to total cap: 32%
  • 10 year annual growth of 9% (note VTR froze dividends during the 08-09 meltdown but did not cut dividends)
  • Since 199, CAGR 29%
  • 10% FFO growth since 2000.
  • Est 5% FFO growth in 2005 + 10% dividend growth after spinoff.
  • Dividend payout ratio of 67%
  • Currently trading at fair value



I consider their buy to be a "full" position in VTR. I won't make any more buys the rest of the year unless something drastic happens. My forward 12 months dividend stands at $1,821.99 + FCISX dividends.

My next buy will be in 2-3 weeks. I'm looking to load up on some consumer staples like ADM, KO, PEP, PM, MO, HSY, etc. Or I might just make a loyal3 buy. Let's hope for more volatility until then. 

6 comments:

  1. Nice purchase, BDI. I just initiated last month and I think its a good price now to start adding shares. Love the long term prospects of this company.
    Congrats on adding more to your FY div income.

    cheers
    R2R

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    1. hi r2r, thanks for visiting. I agree I'm loving all these low reit prices

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  2. Nice buy BDI. I think Ventas is a really solid company to invest in. Congrats on adding a solid REIT.

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    1. Thanks Tawcan. If interest rates go any higher I might have to jump back in. thanks for visiting

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  3. No need to convince me of the opportunity in the large health REITs. I like the VTR buy and will probably add more as Fed rate hike talks gains momentum again. In the meantime, it looks like some awesome deals are coming to the forefront in the industrial sector. CAT, MMM and EMR have each dropped quite a bit in recent weeks. Thanks for sharing.

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    1. hi DH, I agree there are so many good buys now after months of highs. thanks for visiting

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