I try to be as open and transparent as I can with my investing decisions in order to give a real life example of what it takes in order to become financially independent through dividend growth investing. In order to keep track of my reasoning behind a purchase and inform you all about what's catching my eye, I have my Recent Buy series. This allows me to have a written record as to why I made a purchase for my portfolio and be able to look back and see if that holding is still serving its purpose. On Monday of this week I purchased 40 shares of the healthcare REIT, HCP Inc.
I purchased the shares for $42.64 each which gave a cost basis of $42.84 per share after commission. Based on the current quarterly dividend of $0.525 per share, this position carries a YOC of 4.90% and will provide $84.00 in annual dividends before future increases. I've been wanting to get more exposure to both the health care industry and real estate, so I figured that HCP would make for a solid addition to my portfolio.
One of the reasons that I chose HCP over some of the other healthcare REITs is that HCP is very well diversified whereas most of the other ones are more concentrated in one area. HCP primarily owns Skilled Nursing and Senior Living properties, but has exposure to medical offices, hospitals and life science as well. Another big plus is with HCP is that they are a dividend champion having increased the dividend for over 25 consecutive years. This area of real estate will only continue to expand as the demographic shift is something you just can't mess with. Unless you believe that boomers will be a much healthier bunch than previous generations, the health care industry will continue to grow. Dividend Growth Machine had a great comparitive analysis between the major healthcare REIT options and I encourage you to check it out if you're interested in that sector.
This purchase comes with some issues as the Board recently fired the CEO. I don't like that they haven't been too candid about the reasoning other than that it's not performance related and that they lacked confidence in his leadership skills. This has brought about a new CEO, Lauralee Martin who has been on the BoD for HCP for the past 5 years and has been the Chief Executive of the Americas division of Jones Lang LaSalle, a commercial real estate firm. With the Board's lack of transparency there's rumors of what is the reasoning could be and most have come to the conclusion that it's actually due to his managerial skills as they stated. There's also speculation that there could have been financial shenanigans going on; however, why would you not announce that while making the CEO firing announcement and why would you let him keep a seat on the Board? If you wait until later to restate earnings then it's going to be putting an even bigger and undue burden on the incoming CEO. This is obviously a big change for a great company, but I believe that the core business remains in tact so I started a small position and plan to closely monitor going forward.
My FI Portfolio's forward 12-month dividends now sit at $3,112.47 which is 88.93% of the way towards my goal of $3,500 by the end of 2013. This purchase also increased my YOC from 3.33% to 3.36%.
I've update my Portfolio page to reflect this addition.