The chart above shows the types of facilities LTC owns in each state. It is clear that LTC is not overly concentrated in any one state or geographic region in the US.
LTC’s tenant diversification is probably the most important of the three metrics ensuring that LTC is not reliant on any one tenant for a significant fraction of its revenue and earnings. The chart below shows LTC’s current tenant list and the fraction of revenue provided by each.
LTC Properties Operator Diversification
The tenant/operator with the largest revenue contribution is Prestige Healthcare at 14.1% with all other operators contributing smaller fractions. Diversification of tenants is important as has been demonstrated recently by HCP, Inc. (HCP).
HCP had a very heavy reliance on HCR Manorcare in 2012 when it provided 34% of HCP’s income. Manorcare became the focus of a Department of Justice (DOJ) investigation for potentially overcharging the government for Medicare and Medicaid reimbursements. HCP has focused on minimizing its reliance on Manorcare over the last couple of years and it now contributes 24% of HCP’s income. However, the DOJ investigation is still ongoing, Manorcare’s business operations are still suffering, and HCP recently announced plans to spin off the Manorcare SNF properties into an independent REIT. I liken this decision to severing a diseased limb. Through the whole debacle, HCP’s valuation has suffered and they just now have started to recover.
So, LTC is a well diversified healthcare equity REIT with properties located in 30 states. How has it performed up to this point?
How Has Chatham Lodging Trust Performed?
The short answer is “pretty darn well”.
LTC’s stock price has appreciated over the last 5 years from $31.71 to $46.02 or a little over 45%. The dividends paid out during the same period totaled $8.13. For the investor buying in on May 20, 2012 that would equate to a total return of nearly 71% or 11.3% annually. The chart below shows LTC’s stock price between May 20, 2012 and May 20, 2016.
Source: Yahoo Finance
As you can see in the graph, LTC has marched higher over that time with a bit of volatility in the stock price; a little more volatility than I expected given the roughly 0.45 – 0.55 Beta LTC carries. For that reason, LTC probably would not be considered a SWAN (sleep well at night) investment but, the stock’s volatility has provided more frequent opportunities to “Buy the Dips“. Being a long term investor, I can easily live with a little additional volatility.
LTC’s funds from operations (FFO) has also grown at a decent clip over the period and the company has translated FFO growth into higher distributions to its investors. The chart below shows LTC’s FFO growth and dividend growth.
Source: Author
