January 23, 2008
Since we're going through such a difficult time right now, I thought you might find the following instructional. I believe this will be true of anything we do today also.
In April of 1997 I purchased 500 shares of Healthcare REIT (HCN) and in October of 1997, I purchased 500 shares of Eastgroup Properties (EGP) because I wanted a couple of stocks that paid decent dividends. I still own both. If you want to know how these have worked out so far for me up to now, keep reading.
HCN is a real estate investment trust (REIT) that invests primarily in healthcare and senior housing facilities in the U.S. This includes assisted living centers, skilled nursing facilities, independent living care retirement communities and specialty care facilities.
EGP is a self-administered equity real estate investment trust (REIT) focused on the development, acquisition and operation of industrial properties in major Sunbelt markets throughout the U.S. with emphasis in Florida, Texas, Arizona and California.
Now you would think that anything associated with the word REIT would scare the bejesus out of you. Ok, REITs have gotten hit hard this year, but that doesn't mean you should avoid them at all costs.
During these last ten years, we have seen a number of highs and lows when it comes to the markets, too many to reiterate here. You know them all. So let's see how these two securities have worked out for me.
At time of purchase EGP was at $22/share and paid $.34/share quarterly or $1.36/share annually (6.18% yield).
At time of purchase HCN was at $23.53/share and paid $.525/share quarterly or $2.10/share annually (8.92% yield).
Today, HCN is at $43+/share and pays $.66/share quarterly or $2.64/share annually (6.32% yield).
Today, EGP is at $43+/share and pays $.50/share quarterly or $2.00/share annually (4.80% yield).
Both securities have been at higher and lower prices than what they're at today.
So what do the numbers look like??? Below shows what I paid, today's value and the yearly dividends paid out.
Symbol Cost Value 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
EGP $11,000 $21,500 $170 $700 $740 $790 $900 $940 $950 $950 $970 $980 $1,000
HCN 11,745 21,500 795 825 1,124 1,168 1,170 1,170 1,170 1,193 1,230 1,230 1,351
Dividends totalled for EGP - $9,090 and for HCN - $12,426
So I paid $11,000 for EGP and now have around $30,500 to show for it
On HCN, I paid $11,745 an now have around $33,900 to show for it.
So both securities have tripled over 10 years which equates to about 11%/year. This is through good and bad times. I never bought another share (boo) and I failed to reinvest the dividends in additional shares (boo, boo). Ten years ago I was thinking differently. The dot.com was just starting to go gangbusters.
I'm not beating my chest here. I'm just trying to point out how leaving this money alone has created such value. All my bouncing in and out of the market with most of my money probably hasn't done anywhere close. That's why over the last several years I have come to the choir of high dividend paying securities. Not all will pan out. There will be dramatic ups and downs just like we have seen this past year. But if the company or fund is good, you've checked out their track record, you looked at how stable their management has been, what their holdings look like and the market(s) that they're in, then I would hope to see results like these over the next several years. One year is just nothing to hang your hat on.
Timing is a suckers bet. As I'm writing this I was watching the market go down over 250 points only to end up almost 300 points. Who could have told you that???
There are so many securities now that are paying well over 10% only because people (not investors) have thrown in the towel. Herd mentality rules in an environment like this. The worse may not be over as yet. There are many problems yet that have to be surmounted. We will have many more trying days ahead. So spread out your risks, make sure you know what you're buying and why you did so and only if you see that something is going wrong with the company or fund should you consider moving out of it and look at something else.
I hope you feel you got a breather today.
Pete Lipke
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