Thursday, January 2, 2014

New Purchase - HCP


Today I added a new dividend champion to my portfolio.  I now control shares of 15 companies who have increased dividends a minimum of 25 straight years.  This particular purchase will bolster my annual income by $102.90 on a 5.78% yield taking fees & commissions into account.  However I expect HCP will unveil a higher dividend rate later this month.  I'm looking for a 5% increase.

I chose to go with HCP because I feel it offers a reasonable value in today's market, it has a long history of steady dividend raises, and provides a sizable income stream which I can use for reinvestment during the accumulation phase or spending money when I stop working.  I am not looking for above average capital gains, nope, I'm looking for a reliable income source.  Frankly I'm just not sure stocks will be able to continue rising the way they did last year.  I'm also concerned REITs might struggle since interest rates seem to be in an upward trend.  With that in mind I'm not planning to add additional REIT shares for the time being. 

HCP is the 5th REIT in my portfolio and will also be the last.  I'm about 10% REITs at the moment and have hit my limit in terms of portfolio weightings and also the number I'm willing to hold.  My plan is to build up to 50 positions total, 5 from the REIT industry.  From this point forward I'll have to buy additional shares of the ones I already own when allocations allow.  The reason I'm heavy into REITs has to do with my occupation more than anything else.  A career in the Army entails constant moving which makes rental properties impractical for Soldiers.  I've been stationed four places in the past five years, and it gets even worse if you want to include basic training (3 months) & advanced individual training (9 months).  If I knew I'd be staying put for long periods of time I think I'd favor physical rental properties.  But the good news is that REITs are liquid, I don't have to deal with tenants, and they don't tie me down to a specific location.  Those are all qualities I'll enjoy when I finally hang up my boots.

I plan to do a second purchase this month. 

Symbol: HCP
Core Position: No
Speculative Position: No
Expectations: Steady income; 3% annual dividend growth
Automatic Sell: Frozen dividend; dividend cut
Consider Selling:  Business fundamentally changes, management becomes untrustworthy, fundamentals deteriorate, wildly over valued stock price, or position fails to meet expectations.

18 comments:

  1. I like the HCP purchase. I recently double up on my position after pulling the trigger to early the first time. I'll probably be trying to hold off on some more REIT purchases though as there could be more downside if rates spike, plus I don't expect them to make any big moves higher either.

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    1. I know what you mean. Better prices could be on the horizon indeed. On the other hand REITs are performing great operationally. There is nothing wrong these businesses, other than how Mr. Market wants to price them. I considered holding off, I really did, but I think HCP is reasonable right now and I get to start collecting dividends next month.

      HCP hasn't been at the $36 level since summer 2011! I choose LTC during that time which proved to be a good move in terms of dividend growth, yield, and even capital gains.

      Anyways I'm not going all in on REITs, utilities, telecoms. And certainly not bonds.

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  2. That's quite a stable of dividend champions you've got there CI. I'm with PIP, in that I'm trying to resist the yields REITs are offering......because I think bond yields are going higher. I'm looking to start buying REITs about the time the US 10 year hits 3.35%. Still, with a growth record like that no one can fault your purchase
    -Bryan

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    1. We'll see what happens, we won't know till after the fact. This purchase fits my goals and objectives so it moves me one step closer to promise land. I don't doubt investors with different goals might want to pass. Take it easy!

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  3. Nice snag. HCP is on my radar this month!

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  4. Nice buy. Solid yield. I bought 40 shares of HCP in 2013 at $41.25 - too soon! Today, I transferred a couple thousand into my RSP to add to my position. I'll be adding shares as soon as my cash becomes available.

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    1. Hehe my cash became available today, didn't take long. I think I might wait a bit for the other next purchase this month, but I'm ready to strike any day. I have a bunch of free trades available...

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  5. CI,
    Nice pick up. I'm still looking to pick up a third lot on HCP. Been very patient (unusual for me). Hoping to see it in the 35's again or lower, we'll see how this first week plays out. Great long term regardless.
    -RBD

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    1. It could go to the 35's any day. Keep your eyes peeled!

      Yes I'm looking at this long term. No idea if I timed it perfectly, but the stock price is already beaten up.

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  6. CI,

    Nice buy. I find many REITs appealing here. I'm interested in adding to O and ARCP here, but HCP is on my radar for a new investment. I think the valuations and yields make sense for many of these, but I would recommend averaging in just like with any other investment. It's hard to tell where many are going from here with rising interest rates.

    Enjoy that solid yield. :)

    Best wishes!

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    1. Good advise!

      Yes O looks pretty attractive here as well, plus you'd get monthly income. Don't think it didn't cross my mind.

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  7. Good move, CI.
    HCP is a great company and all the negative moves in the last few months sure tempted me as well to pick some up. I already had OHI in my holdings and after a lot of considerations ended up going for O instead of HCP.

    But the future for HCP (and OHI) are very bright considering the aging demographics.

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    1. I actually like OHI more than HCP. But I'm a big fan of diversification so I now own both! Cheers!

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  8. This looks like a good buy to me. I don't want a lot of REIT exposure but the one REIT i do own, OHI, is back in the buy zone. Both are on my list to watch along with VTR.

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    1. Yes OHI is looking good here too. In fact most REITs are priced better than 2013. Investors need to carefully consider their goals and risk tolerance before go heavy into REITs. Even if these businesses are performing well operationally, stock prices might or might not follow that success.

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  9. I like HCP, but I am already quite exposed to REITs so I won't be adding this stock. But it looks nice (its dividend data). Good choice!

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    1. Thanks Martin! Did you get a ski day in? Breck had a lot of fresh powder today and we were up to our knees in snow. Awesome day except a mild case of vertigo (I think) forced me to leave early. Happy new year!

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