Recent Buy – Ventas Inc

Ventas Inc

Its been a quiet month in my portfolio as I have been watching mostly from the sidelines waiting for the right opportunity. While the overall market is at lofty levels, it is important to remember that it is market of stocks and not a stock market. Yes, the indexes point to the fact that the overall market (measured according to these indexes – which simply includes the valuation of the index components) are stretched, but there are pockets of opportunities that exist and patience is the name of the game. As earnings season starts up, one opportunity finally came up last Friday and I was able to deploy some cash adding to an existing position.

I added to my position in Ventas Inc (VTR) with 25 shares @ $55.00. The company yields 5.31% adding $73 to my annual dividend income.

Corporate Profile

From Yahoo! Finance

Ventas, Inc. is a publicly owned real estate investment trust. The firm engages in investment, management, financing, and leasing of properties in the healthcare industry. It invests in the real estate markets of the United States and Canada. The firm primarily invests in healthcare-related facilities including hospitals, skilled nursing facilities, senior housing facilities, medical office buildings, and other healthcare related facilities. Ventas, Inc. was founded in 1983 and is based in Chicago, Illinois with additional offices in Irvine, California; Louisville, Kentucky; Charlotte, North Carolina; and Dallas, Texas.

Recent Buy Decision

  • The second largest healthcare REIT company by market cap at $19.3B. With Ventas, I get exposure to the hospitals, senior housing, medical offices, skilled nursing facilities etc.
  • Ventas is one of the best run healthcare REIT companies and the CEO Debra Cafaro is regarded as one of the best CEOs in the world (ranked #27 in this list from Harvard Business Review).
  • Ventas recently spun-off a new Skilled Nursing Facilities company – Care Capital Properties Inc (CCP) and I continue to hold shares in that company. Ventas decided that SNF can run as its own business and decided to shed the assets turning their focus to the rest of the industry.
  • The demographics support immense growth of the industry. Starting 2010, 10,000 baby boomers have been turning 65 every day and that trend is expected to continue for the next 15 years
  • Current yield of 5.31%
  • As promised, a combined dividend raise of 10% was declared last month between the two split companies. Ventas is a Dividend Challenger, having grown dividends for 6 consecutive years. The 1-, 3-, 5-, and 10-year dividend growth rates are 8.4%, 8.8%, 7.7%, and 8.6%. The amazing dividend growth rates are second only to Omega Healthcare Investors Inc (OHI) in the industry.
  • The stock is attractively valued trading at a P/FFO of 13.4
  • Cash flow and FFOs have grown handsomely over the years. Following charts provide more detail.
  • My Dividend Stock Analysis on Ventas Inc outlines all the reasons to own this fantastic company. Be sure to check it out.
VTR - Q12015

(Source: Ventas Citigroup Presentation March 2015)

Risks

I see three main risks: competition, interest rate moves and changes in payment plans from Medicaid/Medicare.

  • Overall, Ventas faces competition from giants such as HCN and HCP. However, the market is still very fragmented, and there’s still plenty of room to grow.
  • Interest rate moves can provide with some short-term volatility. However, this is something most investors cannot control and will simply have to live with the volatility when it occurs and use the opportunity to initiate and add to position.
  • Legislative changes to Medicaid and Medicare are always possible, which could provide some headwinds.

Further Reading

Full Disclosure: Long CCP, OHI, VTR. My full list of holdings is available here.

 

17 thoughts on “Recent Buy – Ventas Inc

  1. Nice buy, as you have described, at the need for healthcare and healthcare facilities is only growing and people are living longer.

    I think that housing and care facilities is a smart long term play.

    • Hi Devin,
      These long term demographic trends are one of the best ways to invest in my opinion. I will keep piling on those shares – and with the trend supporting the business for atleast a couple of decades – that should do well over the long run.

      Thanks for stopping by and the comment.
      R2R

  2. JC says:

    I’ve been very quiet with my portfolio as well but should be able to start investing more regularly in December. VTR is a solid company and one of my favorite plays. Combining both health care and real estate sounds like a winning combination. The demographics trend alone makes a compelling argument for most health care companies. Would love to add more of this company to my portfolio.

    • Hi JC,
      Healthcare REITs will probably see some more volatility in the coming month with the interest rate jitters. People tend to forget that the chances of move are very low and even if theres a move from the Fed, it will be minimal. Once the knee jerk reaction is said and done, they will realize that their portfolio still needs yield and will return to REITs for that. Love the healthcare REIT space – and good to have you as a fellow shareholder in VTR

      R2R

  3. I think you got yourself a unicorn there. I remember you wrote about it prior to the stock spinoff. During the 10% crash, ventas remained strong. Having stocks that’s yielding >5% will offset any 1-2 percenters in the portfolio.

    • Ventas saw some weakness after that I think. It has a 52-week low of $52-$53, and I waited to see if it falls further before buying more. I figured $55 is a fair price to pay at an attractive valuation.

      Best
      R2R

  4. Nice buy, R2R.

    VTR has been on my watch list for almost two years. It’s the last REIT I’d consider buying into with OHI, O, HCP and NNN (smaller stake) already in my portfolio.

    I’d love to see a sharp spike down on a small interest rake hike announcement as I’d buy the dip. At this rate a hike seems like a fairy tale.

    Best,

    DWC

    • Hi DWC,
      Im expecting a spike in the REIT space as well – as the Fed picks up the drumbeat, but they might just kick the can down the street for now…so, I decided to add a bit here. If they do happen to announce a rate hike, I will pick up some more when we see some major moves.

      Happy investing
      R2R

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