After we saved for our house rebuilding it is time to save some money again. As I had saved enough for another purchase I started looking where I want to invest my money. Most good DGI stocks are on a streak and have some mayor stock price increases since January of this year. In my book these companies are much to far overvalues. The PE keeps rising while the earnings do not in a lot of cases. A lot of people are predicting a crash (which would create superb chances to buy new stocks by the way), but I don’t want to buy at the current ridiculous prices. I know, it could go up much more than it does now, but the chances of the market going down is much bigger in my view.
Therefore, I had to do a lot of searching before I found something I wanted to invest my money in. I first looked at the market I wanted to invest in. This choice was not that hard. I don’t have any REIT’s yet and for the sake of diversification this is a good place to invest. I wanted to invest in Healthcare REITs for a longer time since I believe that there is a great potential for growth in the near and far future. As most of us know, in the Healthcare REIT sector you have a couple of superb companies. Just think of those two:
- Realty Income (O)
- Omega Healthcare Investors (OHI)
Realty Income would be my favorite, but at this time I really wouldn’t think about purchasing the stock. In my book it is way overvalued. The stock is skyhigh this year and it can actually only come down. If that happens in the near or far future, I don’t know. But I’m convinced it will happen.
I believe Omega is great buy at this moment. But while searching I found another company that I didn’t know existed yet. Brad Thomas wrote about Care Capital Properties (CCP) on Seeking Alpha here. In the article you can read that CCP is a spin of from Ventas. It went public a year ago. Comparable to OHI, CCP is also active in the skilled nursing facilities. A market that is going to grow a lot in the future in the US. The same market is also splintered which creates a lot of opportunities to grow for a REIT like OHI or CCP.
Care Capital Properties is the second largest REIT in this sector after OHI. It pays a 7,6% dividend which is well covered by FFO. The dividend is 83% of AFFO. The REIT is priced really well at this moment. Based on Price / FFO CCP is one of the cheapest in the sector. The management is the same that helped getting properties for Ventas and is therefore experienced although the company is not even a year old.
I know there are risks when buying a new company. There is no dividend streak yet and we don’t know anything about the growth figures of the company. Besides that we don’t know how a new president will affect the reimbursement for Healthcare in the US. But I’m very bullish on the sector the REIT operates in and the management is experienced. The market is already taking into account those risks and therefore the price is relatively low and the dividend is high. I’m willing to take the risk for owning this company with a big chance of great rewards on the long term.
Purchase of Care Capital Properties
I paid $ 29,80 for this stock and bought 41 pieces for a total of $ 1.221,80. The company pays $ 0,57 per quarter (7,65%), so that gives me $ 93,48 in forward dividends. Deducting the 15% tax rate that is $ 79,46 net or € 71,63 net forward dividend per year.
What do you think of this purchase? Do you have Healthcare REITS in your portfolio? Would you prefer OHI or do you like CCP?