Healthcare REIT Experiment – Yield, Conference Calls, and Expansion

Beautiful Medical Plaza in Kingsport, Tennessee. Great looking piece of the Max Out of Pocket empire. Physicians Realty Trust acquired it this time last year and it is 100% leased!

You know, it’s actually pretty simple.

Avoid buying large trucks with over-engineered tailgates to get you to and from the office. Take a pass on the $500,000 cookie-cutter house in the suburb that looks exactly like your neighbors’. Say no to the $150 monthly CrossFit membership fees. Dodge the $5,000 emergency room bills (with the help of Max OOP). 

The byproduct of several reasonable decisions over time is usually an obnoxious amount of money left over every month and a relatively short runway to financial independence.  

Next thing you know, you are buying medical office buildings (MOB) just to learn about a new investment. An investment that will (hopefully) deliver even more cash. 

Yesterday was payday. Since Max OOP is no longer getting $12.00 pay checks, it was a good day to look into expanding our medical office building empire. As you may know, we have been buying medical office buildings this last year through our Real Estate Investment Trust (REIT) called DOC. Just a reminder, our core investment strategy is total stock market index funds. We know we probably can’t beat the market, this is just a side project.

I decided to add 75 more shares of DOC to my empire rounding out the position at a nice, even 1,000 shares. The price was cheaper than earlier this month, coming in at only $18.34 per share for about $1,400 total.

Since each share normally pays $0.92 per year in dividends, after this addition I anticipate $920.00 in cash flow from this investment over the next 12 months. Max OOP likes to think of these dividends as rent checks coming from the tenants in my medical office buildings. The rental dividend will be paid in four equal installments of $0.23 per share, or $230 every 3 months. I love passive income. 

1000 Shares X $0.92 = $920 annually

Since this is a learning experiment, we need to start learning a few things.

Conference Calls

Most companies have quarterly conference calls to talk about how the company is doing financially. The company’s CEO and directors usually release important news during these calls and provide updates on material developments. Does your total market index fund do that for you?  (joking)   

Physicians Realty Trust is no different than most companies. They will have their conference call at 10am on 5/1/2019 to discuss how the first quarter (Jan –March) of 2019 went. If you own a stock or REIT, you should probably take the time to listen in on their quarterly update and take notes on significant developments. Trust me, Max OOP will be on the call Wednesday. If the CEO seems drunk and erratic, I will likely sell all of my shares shortly after the call. Pretty unlikely, but you never know.

At times, investors will overreact to news shared on a conference call. If the share price drops too much after a conference call due to some news that is immaterial to the long-term performance of the investment, it can be a good time to buy shares while they are on sale. Max OOP saved some of this week’s paycheck in case this scenario presents itself on Wednesday. 

Yield

It is sometimes helpful to think of yield like the interest you get on your savings accounts. Yield on a REIT comes with a lot more risk than saving accounts, but the concept is very similar. 

The yield you get on a REIT is basically the annualized ‘rental’ dividend you will receive as it compares to the total investment. Since my 1,000 shares of DOC are worth $18,320 (as of Friday), and will pay about $920 over the next year, the yield is just over 5% annually.  This yield is directly impacted by the share price. 

$920 / $18,320 = 5.02%

Another good way to look at it is annual dividend divided by stock price.

$0.92 / $18.32 = 5.02%

My actual cost (purchase price) for these 1,000 shares was only $15,541 – so my yield on cost is a little higher. I am getting an annual yield of 5.92% on every dollar I invested. 

$920 / $15,541 = 5.92%

You can see yield on this fancy Google chart.

The Empire

So this is how our medical office building empire looks as of yesterday. You can see the date I purchased each group of shares, the number of shares purchased, current value, cost basis per share, cost for the position, and total gain on the purchase including dividend payments. Take note – the shares I purchased on 4/5/2019 are down $24.00. The cost includes the $4.95 fee Fidelity charges for each transaction.

The Max OOP Healthcare REIT portfolio, all invested in Physicians Realty Trust (DOC).

Once again, it would be wildly irresponsible to make a similar investment just because some random person on the internet is doing it. This is for entertainment purposes only. Make sure you do your own research; stocks crash all the time for various reasons. Check out this healthcare REIT; it got cut in half for a multitude of reasons.

Talk about a buzzkill. Just a friendly reminder, you take on risk when you buy stocks/REITs.

Max Out of Pocket to build the empire = 8 Fidelity Transactions X $4.95 = $39.60

Do you own any REIT investments?

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1 Response

  1. Nope, no REITs here but they’ve always intrigued me as an investment. Once I have some money to invest, I’ll definitely be looking into those. Thanks for giving us more details about them!

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