Today saw a sizeable decline in the price.
Capitalization of this common stock has improved with a larger % coming from equity, and the long term debt declining from a 5yr average of $150.7 to currently $113.5. In the current credit environment and generally, this is a positive.
Expenses have increased. This is not really what you want to see. They are reflected primarily in two areas; Cost of Goods, which would be properties purchased, increased by 15% reflecting the high real estate prices and SG&A which is management, increased by 117%.
The increase in property costs [to purchase] is unfortunate, and definitely hurts results. The huge increase in management costs I shall look into more closely.
Cashflows have remained positive, and reflect hidden value from the reported Net Profits. This understated income has been utilized to pay down long term debt. This is a major bonus as no further Equity was required to be sold. In point of fact, common stock was reduced, also from cashflows. Cashflows have weakened, but are still showing a surplus that has not filtered through to Net Income.
Cash has increased, not unimportant with the coming problems anticipated in commercial real estate and thus impacting commercial REIT’s.
CapEx is a further cost that has been absorbed by the strong cashflows. Again, this is a little added value.
Revenues have been static. This represents the inability to raise rents. Of course the major concern would be leases renegotiated at lower rents going into the future, which would seriously impact Revenues and overall profitability. Again, leases will need to be further investigated.
All other operating ratio’s are and have been consistent, thus no immediate red flags have been thrown up.
Dividends have been consistently paid, with an approximate 6% compounded increase. Currently the dividend seems secure. This of course is the major concern. Should a serious recession strike this [healthcare] sector, can Revenues be maintained high enough to preserve at current levels the dividend? That there are some hidden cashflows that provide some cushion is positive, but, not conclusive.
Valuation: Currently, overvalued. I have an intrinsic value range from $16.50-$22.39 and with a current price circa $30, we would be paying a premium. However, current Yield is circa 7% this is not an insubstantial factor if as mentioned, this dividend is relatively secure.
NHI Increases Dividend to 55 Cents
February 5, 2008 4:31
National Health Investors, Inc., NHI announced today that it will pay a first quarter dividend of 55 cents per common share to shareholders of record on March 31, 2008 and payable on May 9, 2008. This is an increase of five cents, or 10% over last quarter’s dividend.
This 55 cent dividend reflects the company’s continued success in managing its portfolio and confidence in its future cash flow.
NHI specializes in the financing of health care real estate by purchase and leaseback and first mortgage transactions.
A little further analysis required, but potentially, this common stock is moving in the right direction for a longer term investment.
