Care Capital Properties (CCP) is a relatively new dividend-payer. It was spun off from healthcare REIT giant Ventas (VTR) in 2015.
Since Care Capital has only been trading independently for a little over a year, it has not yet established a long dividend track record.
But it has potential: Care Capital has a high-quality portfolio and should benefit from a structural advantage going forward, which is the aging U.S. population.
As a result, it’s possible Care Capital could eventually become a Dividend Achiever, a group of 272 stocks with 10+ years of consecutive dividend increases.
Care Capital stock has a current dividend yield of 9% – this is more than four times the average dividend yield in the S&P 500 Index.
The company is committed to maintaining and growing the dividend over time, and has taken several promising steps to secure its hefty payout.
Business Overview
Care Capital is a real estate investment trust, or REIT. It operates in the healthcare industry, with a focus on skilled nursing facilities.
Care Capital has an extensive portfolio that stretches across the U.S. It operates 311 nursing homes, 15 specialty hospitals, and another 14 senior housing facilities.
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Source:Â November 2016 Investor Presentation, page 17
Over the first nine months of 2016, funds from operation, or FFO, declined 12% to $2.18 per share. This was primarily due to higher interest expense.
In the first nine months of the year, interest expense increased to $35 million from $4 million in the same period of 2015.
Higher expenses are likely to suppress FFO for the full year. For 2016, the company expects FFO in a range of $2.85-$2.89 per share. At the midpoint, this would represent a 13% decline from 2015.
After a strong performance in 2015, in which FFO increased 7.8% from 2014, Care Capital is likely to take a step backward in 2016.
If interest rates continue to rise in 2017 and beyond, it will be a continued headwind for Care Capital. REITs rely on debt financing to acquire new properties.
