HCP (HCP), a health care real estate investment trust, recently made a huge decision that affects all of its shareholders. In response to deteriorating performance at HCR ManorCare—one of its biggest tenants—HCP spun off its ManorCare portfolio into a separate company.
The new company is called Quality Care Properties (QCP), or QCP.
Investors expecting QCP to mimic HCP may be in for an unwelcome surprise. QCP has not yet set a dividend rate. Given its fundamental challenges, it is unclear whether QCP will be able to pay as high a dividend as HCP.
And, it is also uncertain if QCP’s fundamentals will improve enough to justify dividend growth moving forward.
Meanwhile, HCP is a rock-solid dividend growth stock. It is the only REIT on the Dividend Aristocrats list.Â
QCP is just starting out and has a difficult turnaround ahead, so it has a long way to go before it matches HCP’s dividend track record.
Spin-Off Overview
HCP’s troubles began last year, when ManorCare was charged with submitting false Medicare claims. According to the Department of Justice, ManorCare filed claims that were not eligible for reimbursement because they were not covered or were not necessary services.
This situation has weighed on HCP all year. Dealing with ManorCare distracted HCP from managing the rest of the business. Rather than continue to invest valuable time and resources into ManorCare, it chose to separate itself entirely.
HCP completed the spin-off of QCP on October 31. HCP investors who held the stock on Oct. 24 received one share of QCP common stock for every five shares of HCP common stock.
QCP is now an independent, publicly-traded REIT, with its own management team. Its portfolio will be focused on post-acute and skilled nursing facilities, as well as memory care and assisted living properties.
QCP’s portfolio will initially be composed of:
- 257 post-acute/skilled nursing properties
- 62 memory care/assisted living properties
- 1 hospital
- 1 medical office building
(Click on image to enlarge)
