Chartwell Retirement Residences (CSH.UN.TO)

(A Top Pick May 4/15. Up 19.23%.) A lot of the REITs were under pressure, because of fear of higher interest rates. Still some room for growth. A great industry with good demographics behind it. Still a Buy.

(Owns the convertible debentures.) Not a lot of growth, but a good dividend. They have done a really good job. They went into the US at the right time, rode it up, sold it, and used the funds to buy Canadian, so it has had a really nice run for the last 5-7 years. Thinks growth will slow from here. Demographically it is in a good space. He would guess you would get total returns in the 6%-8% range, compound.

The largest seniors housing operator in Canada. Provides a nice yield of 4%. This is an industry where there is good secular growth and tends to be not as cyclical. Sold off their US operations about a year ago, and redeployed that capital back into the US to grow their presence. Recently announced an acquisition of another retirement home and have been doing that for the last few months. They are slowly starting to increase their dividend. 16% of the population is 65 and older, and in 15 years, they estimate it will be 25%.

It broke out and that was extremely bullish. He likes the REIT space. A lot of them are breaking out. It may be overbought because of the parabolic move and if it pulled back it would be a fantastic entry point.

Extendicare (EXE-T) or Chartwell (CSH.UN-T)? This has been a very good performing stock, and thinks it is going to continue to do well. It is based on an aging demographics trend. This is the one he would prefer.

Had owned this last year, and conceptually had liked where they were placed because of aging population. Did a great sale of their US assets. He has trouble with the valuation, where it is basically trading at 14-15X operating cash flow. A lot of that is based on capitalization rates they use in real estate. Because interest rates are low, capitalization rates are low. Wouldn’t worry about the safety of the payout, but to him, it is a high valuation. He would rather take more of a gamble and buy some of the distressed players like Artis Real Estate Investment Trust (AX.UN-T) that has a 9% yield. This one has a dividend yield of 3.9%.

Likes this company. There is good secular growth that underpins the sector, i.e. that the number of people over age 65 is going to double within the next 25 years, which obviously creates more demand for retirement residences and facilities. This is one of the biggest providers in Canada, and do a fantastic job when it comes to managing expenses. If you own, you could consider taking a little money off the table, but it is a good, long term hold.

(Top Pick Oct 6/15, Up 13.54%) He likes the REIT space and the healthcare space, but wanted to stay away from the Pharma space. This one was an outperformer compared to its peers. Stay with it.

Owns some of their convertible debentures, which will eventually become stock. Thinks it is going to be a little more difficult to repeat their success going forward. They will make small tuck-in acquisitions where they can, and you will get the dividend plus a tiny bit of growth. Valuations are relatively fair right now.

(Top Pick Mar 12/15, Up 16.21%) They refocused into Canada and are starting to raise their dividend. She likes the outlook for senior’s housing. Penetration is very low in the industry. Their occupancy is increasing and has further to go. The cash from the US assets is being used in Canada now for growth and acquisitions.

The sector is rather strange because of a transforming acquisition by Ontario Teachers on Amica, which messed up all valuations on these retirement investments. Sold their US assets and are now totally located in Canada. The largest provider of seniors housing. Have done a good job of curtailing costs and have grown through acquisitions. They only pay out about 70% of their Net Operating Income. They are in a good spot to execute further, as well as a possible distribution increase. The sector is still somewhat expensive.

It is a pretty good long term hold. 4.5% yield and it is off the recent highs. The payout is about 80% which leaves room for error or dividend increases. They have promised another dividend increase. Their occupancy rates are historically low so there is room for improvement there. The retirement business is a tough business with low margins, but there is no shortage of potential clients, who are getting peak value for their homes as they move out of them. He would buy at these levels.

Extendicare (EXE-T) or Chartwell (CSH.UN-T)? This has a higher percentage of independent living and would be his preference. It has slimmed-down and is more of a Canadian focused retirement play right now. He likes it when there is a mix of assisted independent and full government support.

Has reduced his holdings in REITs, but when you look at Canada he doesn’t think interest rates are going to go up soon, they are definitely going to stay where they are. Because of that, REITs should have a good level of support here. He is cautious because of the housing market. His company has a $14 target on this.

Has owned this for a number of years. The stock has pulled back and this is a good opportunity to pick it up. In 20 years, 1 out of 4 persons are going to be over the age of 65. As we live longer, the demand for seniors housing really kicks in. Longevity is increasing. This company is very well positioned. They sold off their US operations, and refocused on Canada. Dividend is attractive at 4.5%.