Go look at NCT and see how safe the divident there was.
NCT is a reit and used to trade in the 30's, now it is 50 cents.
not saying that will happen to hcn, but just because something is a reit doesn't mean you can't lose your shirt.
Correct me if I'm wrong but this question begs the answer. This company is a REIT and, as such, is required to distribue 90% of earnings in order to maintain preferential tax treatment.
The Bear Dog sounds a lot like those geniuses over at the Wachovia message board a year ago. All kinds of do/dil and numbers etc. HCN can simply go back at some point by 3 or four quarters and restate their numbers. These days hardly anyone would be surprised or even outraged. OK a few might blink but others will just wink. After all it's been happening for 3 years now since New Century popularized the practice three months after their CEO retired with a big Fat pension buyout and the rest of a golden parachute. New Century the messenger no one believed! My dividends are safe as I have recently round tripped this trading channel dot com star between $35 and +$39 twice in the last six weeks. I will increase my buy position by 1/3 this time around. What about a $34.50 handle on this one by noon today. OH the pending ex dividend should hold it up...SURE!!! If you want safe dividends you should buy something like a GLHIF. It went up 2 cents yesterday. 2 cents big deal. While the world markets crumbled. Hey can you get by on it's 6.8% ? Most can't these days. Well BDF was up yesterday too at a 7.5% yield. These are investments that are as boring as watching water flow over a dam. HCN is certainly exciting to watch!!! Like a river flows gently to the sea, $34.50 is meant to be!
"bairdgs" gave a pretty good fundamental explanation of his position. I'm not big on dividends, but if I were, I'd take what he provided pretty seriously. Aside from basic pessimism, you might post a real response... Oh yeah, that's 'due diligence', not 'do'... Well, unless you meant 'doo', which the market seems to be knee deep in these days.. jegan ;-D
Yes, I like to read the financial reports in detail. They contain information that is useful. Sometimes the information turns out to have been manipulated or falsified.
However, HCN is in a market segment (healthcare) that is much more secure right now than mortgage financing (New Century). I doubt if HCN has anything that they need to distort or hide.
I'll stand by my comment that HCN is not likely to reduce their common stock dividends and that the HCN preferreds are a better investment. Good luck with your channeling. I'm sure it can be a good way to invest if you do your dd.
For the first 9 months of 2008, HCN's operating cash flow exceeded their dividend payments by $68M. HCN has very little debt until 2011. 2009: $5M, 2010: $15M, 2011: $439M.
Taking into account HCN's on-going maintenance and improvement expenditures, I came up with an adjusted Funds from Operations for 3Q08 of $0.70 per share. If you then take the common dividend per share of $0.68 per share divided by the adjusted FFO, you get $0.68/$0.70 or 0.97.
So HCN was able to cover their dividend from normal operating income plus depreciation less maintenance and improvements. I would doubt that HCN will reduce their dividend. They have never reduced their dividend and this company has been paying dividends for 16 years.
I think HCN's preferred shares are a better investment right now. There is no way they will cut those dividends and currently, if you buy HCNprF, for example, you can get a 9.2% yield with a capital gain to par value of 20%. In today's turbulent times, that is one heck of a deal.
Excellent post. I bought the HCN preferreds last week. Reits should be bought and held rather than traded. The power of compounding is the best, most straight forward form of investing.
As for safety, the safety of the preferreds exceed by a considerable margin the safety of the common. FFO covers the preferred dividend payments by 15X, extraordinarily ample considering a yield between 9-10%. Attempting to predict short term price movements is at best, an elusive proposition.
Both the common and preferreds are good bets. Demographics suggest increasing use of medical care but it is offset somewhat by lower medicare/medicaid reimbursement and greater emphasis on home health care. The choice depends on one's own outlook, individual financial needs and risk profile.
Stocks and Reits always respond negatively to apparent dilution. However, when you realize that cash is king and that some of the proceeds will be used to pay down debt, it is a wise move IMO. The shares will recover once it becomes clear what HCN is planning with the proceeds of the sale.