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Hit Me With Your Best Shot
Eddie Schwartz brought that hit to Pat Benatar in 1979. He also wrote a few thing for the Doobie Bros., Joe Cocker, Donna Summers, and the group America. But so what? Even I don't know where I was going with that. But I digress. So why do Easter Bunnies carry eggs when they don't lay eggs?
Only one reader so far (Ok two if you consider he sent the request for himself and another reader) has sent me a stock with a few reasons to pick the stock to have us kick the tires and look for comparables.
The stock (actually an REIT, a Real Estate Investment Trust). A REIT is a very liquid way of investing in Real Estate almost like a stock. There are special tax considerations, but we won't bore you with that here. (But wait till I get that video cast going. I can do ten minutes just blabbing away about hybrid REITs and mortgage backed securities. You people are so lucky.)
Anyway Hutch, one of regulars and Megan have asked about NHI, National Health Investors, Inc., a real estate investment trust (REIT), invests in health care properties, primarily in the long-term care industry in the United States. As of December 31, 2008, it had investments in real estate assets and mortgage notes receivable investments in 123 health care facilities consisting of 83 long-term care facilities, 1 acute care hospital, 4 medical office buildings, 14 assisted living facilities, 4 retirement centers, and 17 residential projects for the developmentally disabled in 17 states. The company has elected to be treated as a REIT for federal income tax purposes and would not be subject to federal income tax, if it distributes at least 90% of its REIT taxable income to its shareholders. (NOTE FROM BRIAN HERE, CHECK WITH YOUR TAX PERSON TO BETTER UNDERSTAND THE RAMIFICATIONS. IN THEORY, YOU MAY ENJOY A BETTER YIELD THAN THE 5.3% CURRENTLY PRESENTING DUE TO THE FAVORABLE TAX SITUATION.) National Health Investors, Inc. was founded in 1991 and is based in Murfreesboro, Tennessee.
As we just said this REIT is showing a 5.3% yield. In asking Hutch a few questions (HE IS LONG NHI. WE DO NOT OWN IT), he likes the growth aspect knowing that everyone is getting older and sicker and all us baby boomers will need health care facilities. Keep in mind that all REITs are not created equal. They can be focused on a niche category or a niche geographical market. Take SPG Simon Properties who focus on high end malls, and COR, Coresite that focuses on data center facilities. Hutch likes the medical, aging, health care angle. If you agree, how do you find more?
With just that descriptive to go on and not much in the way of fundamental analysis, it is tricky. Here is what we did.
In FINVIZ we searched for REIT in the company profile. It returned 155 REITs. There are more out there, and to find an almost exhaustive list, go to HYPERLINK "http://www.reit.com" www.reit.com. Anyway after you get this list of 155 REITs, at the top of that page result, you can choose to open it in screen format. Once you've done that you can sort by market cap, dividend yield, asset under management, all the fundamental criteria you can use in FINVIZ, which is a lot.
Just leaving the list alphabetically and looking at the Industry column you will see FINVIZ conveniently has an industry descriptive called REIT - Healthcare Facilities. So go to the screener above, use the industry drop down menu and choose REIT - Healthcare Facilities. You will now have 8 you can peruse.
Eight is very manageable. You can look at each just by clinking of their Ticker then come back to the screen showing all 8. You will even see our friend NHI. After looking at all 8, we would suggest you read their profiles. Yields run from 4-8%. Look out for excessive debt and when you see an 8% yield, look at the payout ratio. (They ability to sustain the yield). In a nutshell, NHI looks pretty good, but so do a couple others (HCN and MPW). There are two on the list with excessive debt and weak ROEs. You should be able to spot them.
As far as entry and exits on NHI, it looks as though it has been channeling between 46-52 since last February which was its last clear entry point. Not a bad thing, but its good it throws a great dividend or you got to wonder why you are in the thing. Since it is within 5% of its last clear buy point ($51.04), if we were in a better market, it would be worth a spin. If you choose to get in, tighten the stop from 7 or 8% to 5% to be safe.
Now its your turn, send me a stock and couple of reasons why you like it and we will work our way through thisscreen to see if we can find more and better.
Salve Lucrum
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