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Strategies & Market Trends : REITS - Buying 1 - 2 weeks before going ex-dividend
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To: Richard Barron who wrote (1625)11/28/1999 2:48:00 PM
From: Bob Rudd  Read Replies (1) of 2561
 
Richard: <<I don't think ETT can increase the dividend near term even if GHV is believe to be a strong tenant as rates have climbed so they will have less cash flow than earlier>> I'd agree 'near term' but am looking 1 to 3 years down the road when current financing costs will look excessive as industry stabilizes...then the dividend could be restored based on normalized borrowing costs. Of course that would also imply that dividend yields will fall to 4 or 5 premium to treasuries. Based on 3 year horizon with ETT div yld falling to 5% premium over 6% treasuries, actual dividend being restored to 1.45, and 1.20 annual dividend until then, we have 43% annual return from current levels...If it takes 5 years, the annual return falls to a mere 31%.
ETT may not have told Merrill explicitly that the dividend would drop to $1.20, but as you indicate, Merrill is on inside track to evaluate whatever they were told [Although they've made some truly bonehead statements ...like the supposition that ETT would issue more shares at excessively low prices in an earlier report].
Regarding a relation of healthcare REITs to rest of REIT universe: REIT people seem to mostly ignore it or treat it as a 'crazy uncle in the basement' This sector is tied to HC operators and until the fog clears there share prices will be under pressure. Even HRP, which spun most of it's HC exposure, remains in the doghouse partially, I suspect, because those that consider office REITs investable won't let it back in the club.

bob
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