Healthcare REITs

[vand]

What's the best deal right now?

We have for consideration:

Stock|Yield|1yr tr|5yr tr | Fall from peak
PHP | 8.0% |-6.75% | -28.5% | -48%
AGR | 9.34% | -16.3% |-39.2% | -62%
THRL | 7.25% | 1.15% | -8.45% | -37%
CRT | 8.62% | -2.84% | 1.73% | -36%

Clearly the sector, along with many other REITs in general has struggled since its post-covid peaks.

Personally I hold PHP and CRT which I started buying last year, but thinking of adding AGR too as the yield just looks too tempting now, however existing holders may well wish they had never heard of it!

[Itsallaguess]

We have for consideration:

Stock|Yield|1yr tr|5yr tr | Fall from peak
PHP | 8.0% |-6.75% | -28.5% | -48%
AGR | 9.34% | -16.3% |-39.2% | -62%
THRL | 7.25% | 1.15% | -8.45% | -37%
CRT | 8.62% | -2.84% | 1.73% | -36%

Table converted to PRE format -

Stock  | Yield | 1yr tr | 5yr tr | Fall from peak
PHP    | 8.0%  | -6.75% | -28.5% | -48%
AGR    | 9.34% | -16.3% | -39.2% | -62%
THRL   | 7.25% | 1.15%  | -8.45% | -37%
CRT    | 8.62% | -2.84% | 1.73%  | -36%

Cheers,

Itsallaguess

[micrographia]

I hold AGR and PHP. I topped up AGR a few days ago and will likely do so again later this year. My holdings are down in value, but I started buying in 2023 when the yield was already well above 6% and they have done what I hoped for income-wise. Payout looks safe enough. Given current conditions I imagine both will remain on sale for a good while yet. I see them as essentially interchangeable at portfolio level - it's the old buy whichever is yielding highest at the time argument.

From the company diversification point of view, the main differentiator between them is that more than 90% of PHP's income is backed by government, whereas that figure is about 60% for AGR with the rest coming from private healthcare.

EEM

[FieldsofFire50]

I’m a l/t holder of AGR which an average cost price of 40.3p so about 12% underwater right now in capital terms but in receipt of a lot more in dividends than that along the way. Can’t fault them as a pure income play.

I look at all my holdings in terms of yield plus my (conservative?) assessment of dividend growth over the next 5 years so 9.3% rising by 2.5% pa

To get 50% total return if they deliver this growth the share price would only have to be 4% higher than now in Jan’30 and would be yielding 10.3%

Looking at their respective dividend histories PHP made a better job of maintaining their dividend during the noughties when interest rates were last this high so I’m hoping AGR have learnt from this. LTV is high but they have a lower average cost than other REITs, with limited s/t financing risk

THRL run social care homes so a different sub-sector and I also hold them being a more recent purchase. They have a shorter track record and have not operated during in a higher rate environment. Sensibly they rebased the dividend last year and a 7.1% with 3% growth from here is my assessment. Don’t expect them to be able to expand significantly but they should be able to achieve that growth from existing assets

Good luck whatever you decide

[vand]

An opportunity in Care REIT CRT (formerly Impact Healthcare IHT)? Had a bit of a sell off and currently with a forward yield of 8.8%

Latest update was absolutely fine - more than fine in fact as the rent cover has never been higher, meaning they could easily push higher rents onto their tenants if they really wanted to. I see them continuing to slowly raising the dividend 2-3% as they have up until now

https://www.londonstockexchange.com/new ... y/16774523

Maybe there is some worry Reeves' NIC increases are going to affect them as elderly care is a staff intensity business, but it's their tenants that it affects, not CRT directly

*disclaimer - I hold

[vand]

CRT targeting a 3.6% uplift in diviend for the coming year:

https://www.londonstockexchange.com/new ... t/16867604

· 2.3x tenant rent cover in Q4, up from 2.2x in both Q4 2023 and Q3 2024 . Our tenants' strong rent cover places them well to remain resilient despite the National Insurance increases coming in Q2 2025.

· Contracted annual rent at 31 December 2024 increased to £51.4 million.

· 20.1 years weighted average unexpired lease term as at 31 December 2024, down 0.7 years on the previous year helped by lease extensions and portfolio-management.

· Replacement £50 million 3% interest rate cap purchased, maintaining our average cost of debt drawn at 4.56% per annum.

· 6.95 pence per share target dividend for 2024 delivered, with a Q4 dividend of 1.7375 pence declared today.

· 3.6% increase in dividend target to 7.20p for the 2025 year(3).

***
Like I said.. nothing to not like here.
7.2p/share pushes the forward yield up to 9.1%

[vand]

Looking at how these REITs have managed to grow their dividends over the years -


AGR 2.5p -> 3.34p = 2.93% over 10yrs
PHP 5p -> 6.9p = 3.27% annualized over 10yrs
THRL 6.004p -> 5.7p = -0.51% annualized over 10yrs
CRT 6p -> 6.91p -> 2.3% (since 2018, missing out the large first-year jump)

***

Looking at track record and current yield it seems to me that Target Healthcare THRL is the clearly the worst pick, with stable record of growing the dividend and seemingly no commitment to a progressive dividend policy, and also currently with the lowest yielding stock on offer.


Otherwise, for the other 3 even if we assume that income growth is going to be slightly lower going forward due to the fading of the inflationary spike we've just been through.. with current yields at 8-9% and dividend growth let's say around 2% its not unreasonable to expect an accounting them to deliver 10-11% accounting returns throughout going forward.

[barchid]

The RNS on Friday evening regarding a possible offer from KKR for AGR is going to upset this apple cart on Monday' opening.
As a recent happy holder of AGR I will clearly wait it out but history tells us that KKR are not normally wrong in their selections.
Which could be the next REIT a predator might find attractive ?

[micrographia]

USS sniffing around as well - unsurprising as they already have a joint venture with AGR and this is the kind of business that should be very attractive to pension providers. As a USS member I'm happy to see them actively looking for somewhere good to invest my pension contributions. 48p feels like a bit of an opportunistic lowball from KKR - think that's still below the last NAV figure - and AGR are being bullish on their prospects for value generation.

On the fence with this one. 48p would give me a modest capital gain on my investment but I'd then need to find something comparable to replace the lost income. First world problem though, so if KKR came back with a bigger offer that was accepted I wouldn't be unhappy.

I imagine that as long as REITs in this sector have chunky discounts to NAV combined with stable cash generation they will be potential takeover targets. Unsure about other targets - though FWIW, I think the PHP discount to NAV was about half that of AGR before the offer was reported so perhaps less vulnerable?

EEM

[vand]

Takeovers flying around everywhere.
CRT getting taken over... doesn't surprise me, t'was TOO cheap and an excellent business.

https://www.londonstockexchange.com/new ... c/16934113

[the0ni0nking]

Indeed, rather embarrassingly I purchased a slug in early February so this corporate action has ruined my CGT planning - nice problem to have.

[FanciThat]

Takeovers flying around everywhere.
CRT getting taken over... doesn't surprise me, t'was TOO cheap and an excellent business.

I bought some yesterday at 3pm! Thanks to vand for highlighting it

Cheers FT

[vand]

Takeovers flying around everywhere.
CRT getting taken over... doesn't surprise me, t'was TOO cheap and an excellent business.

I bought some yesterday at 3pm! Thanks to vand for highlighting it

Cheers FT

That is some frickin expert timing!

[FanciThat]

Certainly was! Now what to do with the proceeds, I already hold PHP and SUPR.

Thanks again, FT

[moorfield]

THRL next please pretty please...!

[vand]

Certainly was! Now what to do with the proceeds, I already hold PHP and SUPR.

Thanks again, FT

Yea, indeed. Been thinking about where to put the proceeds.

I want to keep most of it in the REITs as I want to build up my overall weighting in the sector, and CRT was my largest holding.

Thinking spreading it out between

PHP (add more)
SUPR (new)
CREI (new)
LMP (new)

[micrographia]

A couple of days late with this, but AGR still firmly in play. 43p takeover bid from peers PHP rejected, but KKR returned with a slightly higher offer of 48.56p/share and would let shareholders keep the April divi as well; 0.84p/share. Board are minded to accept if a firm offer is made, due diligence underway, SP currently up to around 46.5p.

PHP up a little as well, presumably speculation as the SP was largely unmoved by the solid results they reported at the end of Feb. Price might well be supported moving forward by investors looking to replace the lost income from AGR and CRT. Or maybe the market is finally realising that the sector is undervalued? Hope springs.

EEM