Chartwell Retirement Residences (CSH.UN.TO)

(Market Call Minute) It has behaved okay. This is a time you can buy some dividend yield pretty inexpensively.

Senior housing and senior living has seen a lot of M&A activity. A lot of the US REITs are coming up to Canada to pick away at some of our assets, as valuations are cheaper and Cap rates (the net operating income generated versus the cost to buy them) are higher. Currently it is a little bit expensive. Price to AFFO is 17X. Dividend yield of close to 5%. He would prefer Sienna (SIA-T), which has a higher yield and a lower payout ratio and trading at a Price to AFFO of 13X.

(Market Call Minute.) On the back of the take out of another retirement home, this is a very good hold. It looks like a good sector.

Thinks this has further upside. There is the possibility of a takeover, as there is so much demand from Canadian and American institutions for this sector. Because of that, you could see significant upside. If it doesn’t, this is still an excellent company. The challenge is that there is a real estate component and an operating component. The company has always been looked at from a real estate value of about $12 a share, but that operating business is worth something, especially when you are the only remaining public operator and you have an excellent reputation. Should be a core holding of every portfolio. Yield of 4.43%.

One of their peers was taken out by a pension fund, CPP. This moved up their price. She could see more M&A activity.

Continues to like this. It is very operationally intensive and you need to see an increase in occupancy before it dramatically improves the bottom line. It is starting to get there. This is one of the first years where supply/demand are going to remain very well-balanced, and he thinks demand is going to exceed supply this year. He sees $1 or $2 of capital appreciation potential in addition to the dividend.

It had a dip down when it was removed from the REIT index. She likes the industry. They recently sold off their US portfolio. They paid off some debt. They have an attractive yield and she sees it slowly increasing over time. It held up well in this market. There is always in the background that they could be taken out by a US company. They are good operators.

(Top Pick Jul 15/14, Up 14.13%) They went too aggressively into the US. A lot of US health care REITs have shown an interest in Canada.

Removed from the REIT index last week. Retirement homes, nursing homes. They did very poorly in the US and got out. They now have the ability to spend and acquire. You are playing the proper demographic. He thinks it is on the cheaper side, as are many of these. You may see more M&A in this sector.

(A Top Pick of his in May.) This has huge demographic tailwinds behind it. Recently sold all their US properties, and reinvested some of those funds in Canada. Very good payout ratio. Yield of about 5.5%. A good, long term play for both income and capital appreciation.

Largest seniors housing operator in Canada. Attractive dividend yield of 4.8%. Have only recently started to increase their distributions, which is good in a rising rate environment. She likes the industry because it bodes well with aging demographics. The seniors’ population is going to double over the next 10-20 years at a much faster pace than the overall general population. Recently sold all of its US properties and have decided to refocus on Canada.

Recently another such company was bought out at a 13% premium. You could apply this premium to this company. He likes it because they divested their US business. They have a tremendous pipeline of projects. Investors get a very good yield and should be buying it. The company just announced a buyback program. It is at a discount to NAV. He prefers an operator that has real estate behind them, rather than a manufacturer of products that seniors’ use.

He really likes this at this price. The stock has pulled back. DRIP is a great way to continue to own it and increase your investment in it longer-term. The nice thing about the seniors sector is that it is going to be supported by favourable demographics. The number of people over 75 is going to double within the next 25 years. The caveat is that it is very operationally intensive and expenses have to be managed very carefully. We are finally seeing demand exceed supply.

Has been moved out of the REIT Index, which is part of the reason for its drop. Dividend of about 4.8%, which should grow about 5.4%. The demographics certainly make sense. He is relatively neutral on REITs, given that rising interest rates are not great for real estate trusts.

When comparing to other REITs, the dividend has to do with the payout ratio. It is very safe and well covered. It was removed from the REIT index because it is not technically a REIT and so index vehicles had to sell it. This made a fantastic opportunity to own this company.