$11,000 in Recent Stock Purchases - Find Out What I Bought And Why (Includes a Blockchain Technology Company)
I am incredibly fortunate to have such a large amount of money available in such a short period of time to invest in fantastic businesses.
After a few years of investing, I figured I should become more tax efficient with my investing. This means that I will focus more of my REIT investing into my IRA while buying more growth type companies in my taxable brokerage.
These trades happened between April and May. I funded my 2016 IRA, got my tax return and then put that money into my 2017 Roth.
That means I put in $11,000 into these investments! Holy cow!
Read on to find out what I bought, I am sure at least one of them will surprise you.
Medical Properties Trust (MPW) –
As the name implies, MPW is a healthcare REIT. They own 247 facilities located in 30 states and 5 countries. 66% of their portfolio are General Hospitals, 24% are Rehabilitation Hospitals, and the remaining 10% are long-term care hospitals and medical office buildings. MPW is the landlord that owns the buildings and leases them on long-term contracts to different operators who run the place.
This allows a relatively predictable cash flow that allows them to pay a decent dividend. Still, their tenants might run into financial troubles and that happened with a tenant company called Adeptus Health, which provided 7% of MPW’s revenue.
Also, due to the possibility of governmental change of Obamacare and/or Medicare the market has given many healthcare REITs the cold shoulder. Between the problems with Adeptus Health and the general cautious behavior the market is giving the healthcare sector, the stock dropped. I decided to buy.
It has also helped that they sold some underperforming assets last year. That enabled them to pay down debt and jump on some higher yielding properties. Their payout ratio dropped from 83% to 71% so they now have more room to increase the dividend in the years to come.
I firmly believe that healthcare services will always have a market regardless of government intervention, so my purchase of 120 shares @ $13.72. This will add $115.20 to my yearly dividends. That’s a yield of over 7%.
New Senior Investment Group (SNR) –
New Senior is a smaller healthcare REIT that owns mostly independent-living (65%) senior housing properties. Instead of their revenue coming from government sources such as Medicaid, SNR is 100% private pay. This shields them from sensitivity to healthcare law reform.
But SNR is still risky.
It has a lot of debt and several underperforming assets. This has caused them to sell or consider selling assets, as any profits from the sale can be used to decrease debt.
Another risk is that SNR’s properties as mostly leased to just two operators, Holiday runs 77% and Blue Harbor runs 11%. If one of these companies ran into troubles, it would dramatically effect SNR.
It also has a very slim coverage margin of its dividend. In the last quarter, AFFO (adjusted funds from operations) was 27 cents/share while the dividend is 26 cents/share.
Due to these problems, SNR is trading at the lowest valuation compared to its peers.
I feel that senior living facilities is an area with plenty of long-term tailwinds as there is estimated to be twice the amount of people over the age of 65 by the year 2050. If management can pilot the company past the current problems, there will be great reward for shareholders.
It is also possible another healthcare REIT will buy up SNR to obtain all the assets they own.
In the meantime SNR is paying a dividend over 10%. So I snatched up 100 shares @ $10.36, adding $104 to my annual dividend income.
OMEGA HEALTHCARE INVESTORS (OHI) –
Like SNR, Omega is a REIT focused on owning properties that house the elderly. Instead of independent living, OHI has more skilled nursing and assisted living facilities.
Their AFFO shows that OHI has plenty of dividend coverage, and has increased the dividend by at least a penny every quarter since 2011.
The debt level show no signs of them being over-leveraged. OHI is also decently diversified, the biggest tenant accounts for just 10% of revenue.
Seems that the price is being kept low because of fears of a cut to Medicaid payments. A cut would hurt OHI as most people in its facilities can only afford care due to government payments.
Would the government really send the old folks out of care homes? That seems like election suicide to me.
I owned OHI in my taxable account but have been wanting to bring it into the tax shelter that is an IRA, the Roth IRA is a very good tax shelter for REITs. So I purchased 100 shares @ $31.62 with plans to sell the 86 I have in my taxable brokerage and buy more growth oriented stocks with the proceeds.
Air Lease Corp (AL) –
This company purchases and then leases (or sells) aircraft to airlines. Aircraft leasing has grown and more airlines are seeing the benefit of using the services of companies such as AL.
Aircraft take a long time to be received after placing an order with the manufacturer. If an airline leases they can have more aircraft flying their routes much quicker.
Looking at the financial numbers it shows a company priced at a good value and showing great revenue growth.
They have also recently started paying a dividend and, while it is still low at just .8%, they have been increasing it at a fast rate. The increase from last year was 50%!
I picked up 38 shares @ $36.60 adding a small $11.40 to my annual dividend total.
Facebook (FB) –
Facebook has shown itself to be a money printing machine! Revenues have gone from 12.47 billion in 2014 to 27.64 billion in 2016, while income has increased from 2.94 billion to 10.21 billion in that same time frame.
That is just amazing growth.
They also own Instagram and WhatsApp, which translates to billions of daily users.
All of which FB has an incredible amount of data about. This allows targeted ads directed towards individuals that have shown interest in similar products. Advertisers have realized how powerful that is, and as more and more pay to have their advertisements shown it will lead to FB being able to charge higher rates for that screen space.
FB’s cash horde will allow them to purchase any up and coming company they want to acquire, or create their own version of it. They have shown it is no big deal for them to copy any features that Snapchat might come up with and deploy it on FB or Instagram.
FB is quickly becoming as powerful as Google.
I bought 10 shares @ $142.04 and will look to acquire more.
Celanese Corporation (CE) -
Celanese is in the basic materials and technology industry. They manufacture the ingredients that can be found in everything from paints and coatings to electronics to food and medical items.
I don’t think the need for their products is going to disappear. It is also not a small company as it has a $13 billion dollar market cap and has production facilities in 30 countries.
I found out about this company by searching through David Fish’s dividend list.
What attracted me to it was its great dividend growth rate. Its 10-year average increase was 24%, while its 5-year is an outstanding 41.9%! Celanese’s last dividend increase went from 36 to 46 cents, a 27.78% increase. Management has also stated they are planning on giving large increases over at least the next three years.
It currently yields about 2.1% with a low payout ratio of just over 25%. Plenty of room for dividend growth.
After more research I liked what I saw. A solid company in a sector I have minimal exposure to. I think I will own this one for quite some time.
This was the last purchase I made and was able to pick up 14 shares @ $87.30. It will boost my yearly dividends by $25.76.
BTL Group LTD (OTC: BTLLF) –
I am pretty sure you have never heard of this Canadian company before, but it might interest you if you are interested in cryptocurrencies at all. They are developing a blockchain technology called Interbit to provide financial and asset trading services.Ethereum-based Interbit platform enables institutions to issue and transfer assets over a network using smart contracts and Blockchain technology to automate processes and reduce costs. It has been in beta status while working on major pilot projects with financial giants like Visa, huge European banks, and multi-billion dollar energy companies.
This could bridge the distance between cryptocurrencies and those that don’t believe in them.
This stock has risen along with cryptocurrencies, going from 90 cents to $4.85 YTD.
It is also a huge gamble as Interbit might not come into common use.
But I can take a chance, so I picked up 300 shares @ $3.52. It has been doing well so far, currently it is up to $4.85.
If this stock explodes upward, I plan to sell 100 shares at around $10 to recoup my initial investment and let the 200 shares ride. The blockchain has so much potential but is very volatile.
Conclusion
This is two years’ worth of Roth IRA contributions totaling $11,000. At the current dividend rates, I will be paid the following amounts annually.
Air Lease: $11.40
Celanese: $25.76
New Senior: $104
Medical Properties Trust: $115.20
Omega Healthcare Investors: $252
Total Annual Dividends: $508.36 or a yield on total investment of 4.62%
This rate includes the approximately $2,500 invested in non-dividend paying stocks (FB, BTTLF).
These shares are part of Scottrades ‘FRIP’, or flexible re-investment plan. All dividends go into a holding area and are used to purchase stocks on a set date without commissions.
(If you are interested in opening an account with Scottrade, use my referral code: KAEB9040 and we will both get three free trades)
Currently, all dividends are being directed to purchase OHI each quarter. This should allow me to increase my holdings of OHI by 3 or 4 shares every three months. Of course, the purchase could be redirected to buy any other company I already own in my rIRA. If one share price gets hit hard, I might adjust to capture the bargain.
My plan is to add to my IRA each year, rarely sell any stocks, and allow tax-free compounding to work.
Medical property REIT sounds like a relatively safe bet though i weary of the other OTC choice.
Yes, it sure is risky, but the chances of a large reward are there too.
Definitely volatile with crypto and OTC companies but if you can stomach the risk and think its a solid bet, I say go for it! As long as you aren't betting the farm on it. :)
Heck yea, I can't ever put more than about $1,000 in one of these riskier stocks. My normal amount is about $500.
I have index funds and more solid companies but sometimes I feel like taking chances.
Thanks for sharing. I own one of these OHI. I like the long-term success of this REIT as the U.S. population ages. I haven't heard of some of these companies. I'm always looking for new investments, so thanks for writing about them.
No problem. They are all doing rather well. The healthcare REITS are down a bit but have paid dividends so its not as bad as it looks. These are long term investments, so being down a bit on the short term doesn't matter. Helps in fact, for dividend reinvestment.