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HCP Hikes Dividend by 3.7%, Shares Dip on Broader Worries - Analyst Blog

Zacks Equity Research

Ushering good news for its shareholders, HCP Inc. (HCP), a healthcare real estate investment trust (REIT), announced on Jan 29 a hike of 3.7% in its quarterly dividend rate to 56.5 cents from 54.5 cents paid earlier. HCP will pay the new dividend on Feb 24, 2015 to shareholders of record as on Feb 9.

However, despite the dividend hike, HCP shares suffered a fall of 1.38% on Jan 30 on broader market concerns. The REIT market sentiments remained pessimistic with anticipations of sooner-than-expected interest rate hikes due to the Fed’s recognition of the “solid pace” of U.S. economic growth compared with its earlier view of “a moderate pace.”

Based on the increased rate, the annualized dividend comes at $2.26 per share, resulting in an annualized yield of about 4.8%, considering HCP's closing price of $47.29 on Jan 30.

HCP has been consistent in enhancing its shareholders’ wealth by dividend payouts. In fact, this healthcare REIT’s latest dividend hike marks its 30th consecutive year of increasing its dividend per share.

With an increase in the elderly population and consequent proliferation in healthcare expenses, demand for healthcare facilities and senior housing has been on the rise.

Amid this environment, in 2014, HCP expanded its relationship with Brookdale by creating a new $1.2 billion continuing care retirement communities (“CCRC”) joint venture (“JV”) and amending previous Emeritus leases. Also, in Nov 2014, HCP announced a $630 million (£395 million) debt investment in a UK care home portfolio.

Given its well-balanced, diversified portfolio and decent balance sheet, not to mention the strategic acquisitions and tie-ups, we believe that HCP remains well poised to capitalize on the promising prospects in the industry and benefit its shareholders accordingly.

As a matter of fact, solid dividend payouts are arguably the biggest enticement for REIT investors. Apart from HCP, a number of other REITs also came up with dividend hike announcements, of late.

Among them, Apartment Investment and Management Company (AIV) – commonly known as Aimco – announced a hike of 8% in its quarterly common dividend rate to 28 cents from 26 cents paid earlier. Moreover, Cousins Properties Inc. (CUZ) revealed a 7% hike in its quarterly dividend rate, while Chatham Lodging Trust (CLDT) disclosed a 25% increase in its monthly dividend rate.

Notably, HCP is scheduled to report fourth-quarter results on Feb 10, 2015. The Zacks Consensus Estimate for the stock is currently pegged at 77 cents. Encouragingly, our proven model shows that HCP is likely to beat earnings because it has the right combination of two key components.

For HCP, Earnings ESP, which represents the difference between the Most Accurate estimate (78 cents) and the Zacks Consensus Estimate (77 cents), stands at +1.30%. This is meaningful and a leading indicator of a likely positive earnings surprise. Moreover, HCP has a Zacks Rank #3 (Hold).

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