LTC Properties Stock: Price of 7%-Yielder Popped on Strong Results
May 2, 2024
Aging of Population Helps LTC Stock Reward Shareholders
Stock valuations are in nosebleed territory, and investors have been punishing companies that underwhelm them when it comes to earnings. And rightly so.
On the other hand, investors have also been rewarding companies that surprise to the upside. That’s been the case with LTC Properties Inc (NYSE:LTC), a leader in a lucrative, growing niche field: seniors housing and health-care properties.
In the U.S., 10,000 baby boomers turn 65 every day. This has led some to believe that, eventually, the number of Americans needing somewhere to live in old age is going to decline. That, however, doesn’t seem to be the case. The number of older Americans is expected to more than double over the next several decades and represent more than 20% of the U.S. population by 2050. (Source: “United States,” AARP, last accessed April 30, 2024.)
That’s good news for LTC Properties Inc, a real estate investment trust (REIT) that invests in health-care facilities and seniors housing properties.
The firm mainly makes its investments through sale-leasebacks, mortgage financing, and structured finance solutions—including preferred equity and mezzanine lending. (Source: “Supplemental Operating and Financial Data: First Quarter 2024,” LTC Properties Inc, last accessed April 30, 2024.)
The REIT’s investment portfolio currently includes 195 properties in 26 states with 31 operating partners. Based on gross real estate investment, LTC Properties’ portfolio is made up of 52.1% assisted living properties, 47.1% skilled nursing properties, 0.7% “other” properties, and 0.1% properties under development.
Moreover, because of the high and growing demand for retirement homes and long-term care facilities, LTC Properties Inc is always hunting for strategic acquisitions.
1st-Quarter Earnings Beat
For the first quarter ended March 31, LTC Properties reported net income of $24.1 million, or $0.56 per share. Wall Street analysts had been looking for earnings of $0.53 per share. The firm’s revenues increased in the quarter to $51.4 million. (Source: “LTC Reports 2024 First Quarter Results and Discusses Recent Activities,” LTC Properties Inc, April 29, 2024.)
The REIT’s funds from operations (FFO) inched up in the first quarter to $27.5 million, while its National Association of Real Estate Investment Trusts (NAREIT) FFO advanced 10% year-over-year to $29.9 million, or $0.69 per share.
Furthermore, the company’s funds available for distribution (FAD) grew in the quarter to $31.3 million.
The strong results came from higher rental income, higher interest income from mortgage loans, and a $3.3-million net gain from the sale of seven assisted living communities.
During the first quarter, the company completed the completion of the previously announced sale and re-lease process of 10 assisted living communities. It also sold its interest in a joint-venture investment in an assisted living facility in Wisconsin for net proceeds of $20.2 million and repaid $25.2 million under its revolving line of credit.
Monthly Dividend Maintained at $0.19 Per Share
Companies that pay reliable dividends are able to do so because they make a lot of money. Steady dividends are a testament to a company’s underlying strength.
As a REIT, LTC Properties Inc legally has to distribute at least 90% of its taxable income to investors in the form of dividends.
While most companies pay their dividends quarterly, LTC Properties pays its dividends monthly. Getting 12 monthly paychecks instead of four is particularly attractive to investors right now, with inflation taking a huge bite out of household incomes.
Thanks to its ongoing financial strength, LTC Properties has been able to reliably provide dividends since 1992.
On April 1, management declared monthly cash dividends of $0.19 per share to be paid in April, May, and June. (Source: “LTC Declares Its Monthly Common Stock Cash Dividend for the Second Quarter of 2024,” LTC Properties Inc, April 1, 2024.)
As of this writing, that works out to a forward yield of 7.02%. LTC Properties stock’s high dividend yield is pretty much in line with its historical average. Its five-year average dividend yield is 6.14%.
Although LTC Properties hasn’t increased its monthly payout since October 2016, the expected interest rate cuts should help juice the company’s profits, which could lead management to increase LTC stock’s dividends.
LTC Properties Stock’s Price Broke Through Resistance Level
In addition to paying reliable monthly dividends, LTC stock has been rewarding buy-and-hold investors with share-price appreciation.
Before the COVID-19 pandemic set in, LTC Properties stock was trading at record highs. For the 10-year period ending December 31, 2019, the stock—with dividends reinvested—provided returns of 174%.
Thanks to LTC Properties Inc’s recent solid financial results, its share price has been doing quite well. As of this writing, its up by:
- 6.0% over the last three months
- 10.2% over the last six months
- 7.0% year-over-year
For technical traders, LTC stock broke through a resistance level of $32.64 on April 30 (the day after LTC Properties Inc announced its first-quarter financial results), hitting an intraday high of $33.50. As of this writing, LTC Properties stock has a support level of $31.95 per share.
Chart courtesy of StockCharts.com
The outlook for LTC stock is pretty solid, with Wall Street analysts providing a 12-month share-price target of $36.00 per share.
The Lowdown on LTC Properties Inc
LTC Properties is REIT with a diverse, high-quality portfolio of seniors housing and health-care properties. Management continues to expand the company’s operations in order to meet the needs of America’s aging population, raising rents and keeping its properties at full capacity along the way.
After a solid 2023, in which LTC Properties Inc further optimized its real estate portfolio, the REIT entered 2024 stronger and in a better position to grow its portfolio. Following that, the company reported a first-quarter earnings beat—with its FFO, NAREIT FFO, and FAD all advancing during the quarter.
All this helps LTC Properties stock provide investors with reliable, monthly dividends.
