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Author: BruceCM Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 77131  
Subject: NHI Date: 4/19/2013 12:36 AM
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Doing a bit of reading and came across an article in, I believe, Forbes, that listed out health services providers that rely heavily on Medicare and/or Medicaid for their livelihood, and on the list was a small but long-term HC REIT I've been holding forever, NHI. Hmmmm.

So read through their 2012 shareholder report, and yep, they do indeed rely 'primarily' on Medicare and Medicaid for their property operators. No % of revenue given (that I could find), but suffice it to say, a reduction in M/M payments would definitely be felt by their operators.

To date, their numbers look good. Diluted FFO POR is 83%, an improvement over 2011 at 86.6%. AFFO POR also improved to 83% from 83.8%. Dividends for 2012 were 99.6% ordinary income, up from 85.5% ord income and 12% capital gains in 2011. ROC has been less than 2%/yr over the past 3 years. Dividend growth from 2010 to 2011 and 2011 to 2012 have been 5.7% and 5.8%, respectively.

The bad stuff:

Leverage has grown from 22% of equity in 2011 to 43.4% in 2012. Now, you could argue that NHI execs were holding back and preserving their leverage for better acquisition prices/better interest rates for a better return on capital. Maybe...or maybe not. Hopefully, the increased debt acquisitions will prove fruitful...although it will, I believe, extend their risk to revenue if M/M does tighten payments. Leverage works both ways.

For prospective buyers, the other bad news is NHI, like other HC REITs, has been on a tear. NHI has grown an annualized 22.7% over the past 5 years, 23.5% over the past 3 years and 38.3% over the past 12 months....although it is still yielding a respectable 4.2%.

But then there's that dependence on M and M........

BruceM
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