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Dividend Investing Stocks (Archived)

SNH - Senior Housing Properties Trust

Dividend investing is a popular strategy with investors seeking an income stream. Dividend investors can be placed into two broad categories.

  1. The growth approach - buy dividend paying stocks with emphasis on the company's ability to grow and increase its future dividend payments (to maximize the future yield).
  2. The yield approach - buy dividend paying stocks at cheap prices (to maximize the current yield).

Dividend investors using the growth approach tend to look for the same basic growth characteristics as found with growth investing, but the stock must also pay a reasonably reliable dividend.

Dividend investors using the yield approach tend to be more concerned with the stock price and the companies ability and willingness to pay a regular dividend rather than its ability to expand.

Sometimes a company will satisfy the requirements for both approaches.

In the June 2014 issue a fundamental analysis is conducted on a selected sample of stocks. The analysis is based on fundamental data from one year ago. This allows financial students and investors to see how the stock price performed over the next 12 months after the hypothetical purchase.

Senior Housing Properties Trust

Senior Housing Properties Trust NYSE:SNH is a mid-cap real-estate investment trust and its stock trades around $40 million per day. SNH was organized in 1998 and has an established history of paying dividends.

The key fundamentals for SNH are shown below.

Growth fundamentals for SNH

YearIncomeEPS ROEDividendBook ValueEmployees
20031300.78 6%1.2412.40500
20041400.84 6%1.2613.00520
20051600.82 6%1.2812.80530
20061700.85 6%1.3213.10540
20071800.97 7%1.3814.10560
20082300.93 6%1.4015.10580
20092900.87 6%1.4314.90600
20103200.82 5%1.4615.00650
20114700.99 6%1.5015.20740
20126300.78 5%1.5415.00820

The fundamental data above shows that SNH has broadly increased its income, but this increase is not reflected in its earnings - this indicates that SNH has been increasing the number of shares outstanding.

Fundamental Analysis for SNH:

The dividends and book value have increased slightly over the last decade. The number of employees has increased.

The return on equity is quite low at around 5% to 6%. The profit margin (profit to income ratio) is strong and ranges from 21% to 45% over the last decade - this is expected for a REIT.

The debt-asset ratio (total liabilities to tangible assets) varies from 26% to 45% over the last decade - this means that SNHs long-term debt is conservatively financed. Intangible assets and goodwill are not included in the ratio calculation. The tangible assets are used for the ratio calculation because these are hard physical assets that can be sold off in the event of bankruptcy liquidation whereas intangibles and goodwill cannot be sold.

The income for the 2013 fiscal year is projected to grow at 16% (based on the five year income growth trend). The earnings growth for the 2013 fiscal year is projected to be flat - This means that the forward PEG valuation cannot be calculated.

The forward PE ratio is around 34 (calculated from the five year earnings growth trend rather than from forecast earnings).

SNHs book value is around $15 and the current business valuation is around $15 (with a 2.0% ten year Treasury bond yield). This means that SNHs earnings potential is worth the same as its net assets - this is a REIT and not a growth company.

The sample analysis uses data that is one year old. The hypothetical purchase date for the stock is 23-May-2013 and this allows the reader to see how the stock performed over the next year.

SNH had its 2013/03 quarterly results released prior to 23-May-2013 and this information is available for the analysis. The 2013 Q1 earnings showed a decline of 5% over the same quarter from a year ago (2012 Q1). The 2013-Q1 dividend is $0.39 for the quarter which is a 3% increase over the same quarter from a year ago (2012 Q1).

Overall the fundamentals are quite good with this mid-cap REIT which has a reliable history of paying a regular dividend. Additional information such as consensus forecast earnings, broker recommendations and insider transactions are not considered for this sample analysis. A hypothetical position taken in SNH on the 23-May-2013 would give a purchase price of around $24.

The stock price performance is shown below in Chart 2. along with the annual earnings year to year growth. The stock chart is adjusted for splits and dividends.

Chart 2. Stock chart with earnings for SNH

weekly Chart SNH

As shown in Chart 2. above, SNHs lost around 4% over the next year including dividends. SNHs 2013 annual earnings increased by 4% over the 2012 fiscal year. SNHs 2013 dividends were $1.56 which is a 2% increase over the 2012 fiscal year.

Stock Analysis for Finance Students and Investors