With the stock market reaching new highs, its tough finding good deals. I haven’t bought anything recently but I still hold stocks that I bought cheap and continue with buy and hold. For those that are looking to invest money on the sideline, I would recommend you stick with dividend stocks for your retirement funds since you are not paying any tax on that.
HCP, a healthcare REIT, currently yields over a 6% dividend that has a stock price that has remained fairly steady for half a decade. Even though the stock price didn’t move much, you had a nice dividend that is much better than a savings account getting less than 1%. This stock has underperformed in analysts books and it even went as low as $26 earlier this year.
HCP is planning to spinoff part of its real estate portfolio into another REIT. Shareholders of HCP will get shares in the new spinoff that will consist of senior housing and post-acute real estate. HCP will become a stronger more stable REIT after the spinoff since the new REIT SpinCo is considered more risky.
The baby boomers are reaching senior age. The percentage of senior population is expected to rapidly increase in the following years. With the advances in healthcare, you can expect people to be living longer which means more demand for senior housing. This should help HCP in the long-term.
In the short term, HCP has had bad management and it has poorly used shareholder capital. The SpinCo REIT will get rid of its bad assets. Many investors thing that HCP might be worth looking into investing after the spinoff which is another play on the stock pick.
I personally think that the spinoff would help both companies. The SpinCo REIT would be more interesting to investors with a stronger aptitude for risk and gains. It would also mean a cash infusion to HCP. I do expect that HCP’s stock price will eventually start moving up again which would mean you would continue to get the dividend and a nice appreciation on the stock price.