Micro Blog #4: So HCN (Welltower) Froze Its Dividend. What Now?

Well, I was eagerly waiting for a 1% dividend increase from HCN (Welltower) as I track when each one of my dividend stocks are expected to raise their dividends.

Therefore, when HCN announced its next quarter dividend yesterday, which did not include the raise, I was quite disappointed.

Let's see what management said about dividend and FFO in their Q3 Earnings Report:



There was only a single mention of dividend in the last earnings report, and no forward looking statements on dividend. Not very comforting, but they did mention their dividend history of 186th consecutive dividend payment.

The forward guidance for FFO was increased in Q3, which is a positive sign. With a mid point FFO guidance of $4.22, the dividend payout ratio comes out to be about 82%. That's a bit high, historically speaking, but not bad at all for a REIT.

Dividend is well covered and increased FFO guidance in Q3 ER is a positive sign. We have to see, if they maintain or raise this guidance for 2018 in Q4 ER, due Feb 22.

I think management is being conservative with the dividend increase this year due to increase in govt. oversight on medicare/medicaid payments and risks of higher interest rates.

I believe management would increase dividend later in the year to maintain their dividend contender status. A dividend contender is a company that has increased its dividend for 10-24 years. HCN has increased its dividend for 14 consecutive years and I doubt it management would risk losing that status, short of a major catastrophic financial situation.

Bottom-line, with a 5.9% yield, a freeze is a lot easier to take, especially when it isn't a freeze yet. I will treat it as if HCN has just delayed the raise for now and wait for the increase later in the year.

Disclosure: I'm long HCN

Comments

  1. Thanks Mr. ATM. This review is helpful. I have a few to many stocks (many of which we share in common, as you know) to follow them all as closely as I should. Not the best approach as an investor, so I appreciate you having an extra set of eyes for me. I was thinking about adding to HCN, but maybe I will pause for now. Tom

    ReplyDelete
    Replies
    1. You are very welcome Tom. Monitoring my stocks is now my full time job :)

      Yes, l would not be adding HCN till there is more clarity on 2018 guidance and dividend growth. I normally stop adding any more shares when company freezes it’s dividend.

      Delete
  2. Hello,

    HCN is one of handful of REITs that I've been eyeing lately and I will keep on my radar so when I came across that title it caught my eye. If they revised their guidance for a more favorable outlook on the year I find it interesting that the didn't manifest that confidence through a modest dividend increase.

    PIV

    ReplyDelete
    Replies
    1. Hi PIV,

      HCN is a great REIT and one of the strongest and largest in healthcare. I think management has been too conservative, which may not be a bad thing given uncertainty around healthcare. I’m confident they would raise dividend later in the year.

      Yes, keep it on your radar and l would be monitoring it too. They have till December to raise the dividend or risk losing contender status.

      Delete

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