Recent Buys - OHI & VTR

The stock market has been quite volatile for the last few months. This is a welcome event for someone who's still in the portfolio accumulation phase. Why? When you're in the portfolio accumulation phase, you want to purchase as many stocks on discount as possible. The volatility allows for such opportunity. During the portfolio accumulation phase, you do not want to see a prolonged bull market because that means you'll end up purchasing stocks at hyped-up valuations. The ideal case is to encounter a bear market during your accumulation phase, then encounter a bull market when you're retired and using your portfolio as the retirement income. This is a perfect example of buy low, sell high.

I'm happy to see the volatility continuing. Unfortunately we're almost maxing out on our tax-sheltered accounts, so the next step might be start purchasing stocks in our regular taxable accounts. We are also planning to start saving money toward next year's TFSA and RRSP contribution rooms. Future purchases for rest of the year may slow down a bit, but we'll have to see.

As you may know, the energy sector has taken quite a beating the last few months. We would like to continue buying stocks in the energy sector to take advantage of the depressed sector, however, we also would like to continue adding stocks in other sectors that we believe have good growth potentials. This is where the healthcare sector comes into place. As the baby boomers age, healthcare related businesses will become more and more attractive to invest in. Major healthcare tycoons like Johnson & Johnson and Abbott Laboratories comes up in mind as good companies to invest in. Another good place to look into is in the healthcare REITs sector.

Healthcare REITs hold properties that are related to healthcare businesses, such as senior housing facilities, medical office buildings, and hospitals. As the general population ages, there will be more demands for these healthcare facilities. Furthermore, many seniors no longer live in close proximity to their kids' families, making the need for senior housing facilities a necessity for some of them.

With that in mind we recently added

30 shares of Omega Healthcare Investor (OHI)

16 shares of Ventas (VTR)

We already hold OHI in our dividend portfolio, so this was to add to our existing position. VTR is a new position for us.


OHI Overview

From Google Finance: Omega Healthcare Investors, Inc. (Omega) is a self-administered real estate investment trust (REIT). The Company invests in income producing healthcare facilities, long-term care facilities located throughout the United States. The Company provides lease or mortgage financing to qualified operators of skilled nursing facilities (SNFs) and assisted living facilities (ALFs), independent living facilities, rehabilitation and acute care facilities. Its portfolio of real estate investments include over 900 properties located in 41 states and operated by 81 different operators. Its portfolio includes healthcare facilities and mortgages on healthcare facilities. It also offers fixed-rate mortgage loans.

Recently OHI merged with Aviv in a $3 billion deal that further strengthened OHI's position in the healthcare REIT sector. The combination of the two companies means OHI is now a leading skilled nursing facilities REIT in the US.

OHI has had a great dividend history, having raised dividends for 13 straight years, with a 10 year annualized dividend growth rate of 10.9% and a 5 year annualized dividend growth rate of 11%. The dividend growth in the last few years has slowed down to about 8% but considering the higher starting dividend yield of 6.1%, an 8% growth is still pretty solid. When you compare the dividend to the adjusted funds from operations (AFFO), the payout ratio went from about 80% in 2004 to about 70% in 2014. Considering the dividend payout has grown by 10.9% in 10 years, the lower payout ratio means OHI managed to grow its earnings at a higher rate than the dividend payout rate. This is a great indicator of a good management. If you look at OHI on Google Finance you'll notice that the PE ratio is 22.28, quite high for your usual dividend growth stocks, as we typically want to target a stock with PE ratio of 20 or lower. However, PE ratio is not a good number for measuring REITs, rather, we should take a look at the Price/Funds from operations (P/FFO) ratio. OHI's P/FFO ratio is roughly 12.5, which is in the middle range compared to other healthcare REITs. The stock price has dropped significantly from its 52 week high of $45.46. The current price level is very close to the 52 week low. Considering we're holding OHI for the long term, we decided to take advantage of the lower stock price, and add some shares to our existing holding.

One thing I really like about OHI is its lease and mortgage expiration schedule. When you look at their quarterly results and annual reports, I noticed that the weighted average lease maturity is 13 years. About 89% of OHI's portfolio expiration will not occur until after 2020, and very few will expire in the near term. 2018 is the only abnormality, with 6% of the leases expiring in that year. This should be considered as a great news, meaning the company will be able to maintain its solid earnings moving forward.


VTR Overview

From Google Finance:
Ventas, Inc. is a real estate investment trust (REIT). The Company has a portfolio of seniors housing and healthcare properties located throughout the United States, Canada and the United Kingdom. The Company operates through three segments: triple-net leased properties, senior living operations and MOB operations. The triple-net leased properties segment invests in seniors housing and healthcare properties throughout the United States and the United Kingdom and lease those properties to healthcare operating companies under triple-net or absolute-net leases that obligate the tenants to pay all property-related expenses. The senior living operations segment invests in seniors housing communities throughout the United States and Canada and engages independent operators, such as Atria and Sunrise, to manage those communities. The MOB operations segment, acquires, owns, develops, leases, and manages MOBs throughout the United States. It invests in seniors housing and healthcare properties.

Earlier this year, VTR acquired privately owned Ardent Medical Services for $1.75 billion. Ardent is a premier provider of health care services and one of the ten largest for-profit hospital companies in the US. Just recently, VTR announced it would re-organize its portfolio by spinning off most of its nursing facilities to create a new company called Care Capital Properties (CCP). The spin off is expected to complete in August 2015. VTR shareholders will receive 1 share of CCP for every 4 shares of VTR, meaning we should expect 4 shares of CCP once this transaction is completed. Furthermore, it is expected the spin-off will result in a combined 10% dividend increase in both companies.

Recently VTR reported strong quarterly earnings, with net income increased by 2.4% and AFFO up 5% year over year. The occupancy rate is quite strong at 90.8%. VTR is expecting its AFFO to grow between 5 - 6% moving forward. VTR has a strong dividend growth history, with a 10 year annualized dividend growth rate of 8.6% and a 1 year annualized dividend growth rate of 8.4%. At current dividend yield rate of 4.7%, this kind of dividend growth rate is very solid. VTR has a P/FFO ratio of 14 which is in the mid-high range compared to other healthcare REITs. Just like OHI, the stock price has been seeing a downtrend recently. The price has bounced back slightly since the recent earnings call but still about 20% off the 52 week high price. For long term investors like us, this provides a great investing opportunity (man I fee like I'm repeating myself a lot here).


Both OHI and VTR share similar risks. Although the healthcare REIT sector is still quite fragmented, there are a few competitions out there. OHI and VTR can be considered as competitors when it comes to senior nursing facilities.

Another risk is the impending interest rates hike in the US. This could create some volatility in the stock price. However I believe the current stock prices for OHI and VTR already have the impending interest rate hike priced in, as we saw in the recent downward trend in the REIT sector. Furthermore, considering the economies outside of the US are in somewhat of a turmoil, the Fed may not raise interest rates until later half of 2016. It is also very possible the interest rates hike will get delayed further. I expect the REIT sector to recover from the downward trend in the near future.


I believe we purchased shares of two solid companies with a lot of future growth potentials. As the world population ages, I really like what the healthcare REIT sector can provide.

These purchases will add $116.56 into our annual dividend income.

You Might Also Like


  • Reply
    August 6, 2015 at 3:32 pm

    Very nice buys Tawcan!
    Also bought some OHI today as a result of selling Baxalta.
    The yield on OHI is really excellent and sure beats BXLT's yield.

    • Reply
      August 8, 2015 at 2:31 pm

      Hi Fab,

      Great time to be buying OHI right now.

  • Reply
    Dividend Mantra
    August 6, 2015 at 6:04 pm


    Strong move here. I continue to like OHI quite a bit right now, and even more after the small drop today. Not sure if I'll have enough capital for another buy this month, but OHI remains one of the more likely candidates for that.

    Enjoy that big addition to your dividend income!

    Best regards.

    • Reply
      August 8, 2015 at 2:32 pm

      Hi Dividend Mantra,

      I really like the healthcare REIT sector due to the reasons I mentioned in the post. There will be more and more needs for such companies in the future.

  • Reply
    Dividend Wisp
    August 6, 2015 at 9:11 pm

    OHI seems to be a name I keep seeing people buying, and would probably consider for myself in the future when I start an RRSP. I'm guessing that is where you placed it? VTR is a new name to me, seems pretty solid as well. And gotta love that ~$9.5 (more with FX rate?) a month in distributions 🙂

    • Reply
      August 8, 2015 at 2:33 pm

      Hi Dividend Wisp,

      Yup, buying them in RRSP so I don't need to worry with the withholding tax.

  • Reply
    August 6, 2015 at 11:44 pm

    Congrats on the buy! You're adding more dividend income with every buy! So inspiring, keep at it. 🙂

    • Reply
      August 8, 2015 at 2:33 pm

      Hi Henry,

      Thanks. 🙂

  • Reply
    Dividend Hustler
    August 7, 2015 at 8:01 am

    Awesome purchases Tawcan. I like the Healthcare REIT play. This space is gonna explode with all the baby boomers so let's keep tackling it. Thanks for sharing.

    • Reply
      August 8, 2015 at 2:34 pm

      Hi Dividend Hustler,

      My thought exactly! This space is gonna explode soon.

  • Reply
    August 8, 2015 at 12:02 am

    Two buys I can get behind. I love health in general and among all the REITs, health is my favorite play. Still don't own OHI but it's on my radar. I'm still building up my HCN, HCP and VTR in my IRA. Good long term buys. Just wish JNJ could fall a little further as well as BDX and AABV/ABT too.

    • Reply
      August 8, 2015 at 2:34 pm

      Hi DivHut,

      HCN, HCP, and VTR are all solid names. I too wish JNJ would fall a little further too.

  • Reply
    Dividend Diplomats
    August 8, 2015 at 5:29 pm


    Great buys! I like seeing you dive more into the REIT game, especially when the price gets pushed down a bit. Market has been fairly volatile, fun to strike while the iron is hot. Congrats on the purchases, great addition to the forward income.


    • Reply
      August 10, 2015 at 8:29 am

      Hi Lanny,

      Thanks, it's nice to be able to purchase these companies at somewhat of a discount.

  • Reply
    August 9, 2015 at 7:26 am

    A question from one Canadian to another. Why look to US Reits when Canadian Reits seem to be making new lows weekly? I've been running a 52 week low screen and interestingly enough, Riocan, Cominar and Canadian Reit are making new lows. I'm not disputing the investment potential of the US Reits in any way shape or form, but you're paying +1.30 in exchange to buy US Reits when you can go shopping in your own back yard.

    My guess is that some of the pressure on Riocan currently has to do with the Target lease recourse issue as well as concerns over Canadian recession. All in my humble opinion of course.

    • Reply
      August 10, 2015 at 8:31 am

      Hi Dan,

      Very good question. We already own quite a bit of Canadian REITs and we're DRIPing on all of them so we decided to add to US REITs to add more diversification.

  • Reply
    August 9, 2015 at 11:00 am

    Good buys, Tawcan. I also bought VTR last week, reits are a great play now, with the chatter on fed rate hike in Sept. OHI is getting interesting and would love to add it as well. Keep racing!

    • Reply
      August 10, 2015 at 8:32 am

      Hi Race2Retirement,

      Great buy on VTR. I think REITs will remain volatile the next while but it's fine for us long term investors.

  • Reply
    Dividend Explorer
    August 9, 2015 at 2:28 pm

    Hi Tawcan,

    OHI and VTR are two solid buys. I too like the healthcare sector as a whole including the healthcare REITS, and believe there will be tailwinds behind them. I am looking to build and/or add to positions in all the healthcare companies you mention on any weakness in price. Thanks for sharing.

    • Reply
      August 10, 2015 at 8:32 am

      Hi Dividend Explorer,

      Agreed that there will be tailwinds for healthcare REITs in the near future. Should be good long term hold.

  • Reply
    Dividend for Starters
    August 10, 2015 at 3:48 am

    Hey Tawcan,

    Great buys! I'm a recent shareholder of OHI as well.
    At this moment, 20% of my portfolio consists of Finance stocks, so I can't add more.

    The good news: my watch list looks like a candy store, so there are a lot of opportunities!

    Have a nice day! DfS

    • Reply
      August 10, 2015 at 8:33 am

      Hi DfS,

      Similarly we hold quite a bit of finance stocks so diversifying into another sector is always a good thing.

  • Reply
    August 12, 2015 at 7:14 am

    Great to have you as a fellow shareholder in OHI and VTR! Those are the two names that I own in the healthcare REIT space.


  • Leave a Reply