HCP HCP Inc

Health Care REIT Inc. (HCN), a real estate investment trust (REIT) that operates senior housing and health care real estate, reported fourth quarter 2011 FFO (funds from operations) of $154.4 million or 83 cents per share, compared to $85.1 million or 61 cents in the year-earlier quarter.

Funds from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

Excluding one-time items, recurring FFO for the reported quarter was $168.9 million or 91 cents per share, compared to $104.1 million or 75 cents in the year-ago quarter. The recurring quarterly FFO marginally beat the Zacks Consensus Estimate by a penny.

For full year 2011, Health Care REIT reported FFO of $524.9 million or $3.01 per share, compared to $280.0 million or $2.18 in the previous year. Recurring FFO for the reported fiscal was $594.0 million or $3.41 per share, compared to $395.1 million or $3.08 in 2010. The recurring fiscal 2011 FFO exceeded the Zacks Consensus Estimate by 2 cents.

Total revenues during the reported quarter were $407.4 million compared to $196.4 million in the year-earlier quarter. Total revenues for the reported quarter were well ahead of the Zacks Consensus Estimate of $390 million.

For full year 2011, total revenues were $1,421.2 million compared to $657.3 million in 2010. Total revenues for the reported fiscal exceeded the Zacks Consensus Estimate of $1,389 million.

During the quarter, Health Care REIT invested $1.2 billion in healthcare facilities, bringing fiscal year 2011 tally to $6.0 billion, including acquisitions of $1.1 billion and $5.6 billion respectively. The strategic investments in high-quality properties yielded attractive total returns of 21% in 2011 – the highest in the peer group sector.

Health Care REIT has continually invested in assisted and independent living facilities as demand for these facilities is set to increase with an aging Baby Boomer generation. In addition, the healthcare industry is the single largest industry in the U.S. based on Gross Domestic Product (GDP).

Consequently, healthcare REITs are well poised to maintain their growth curves and simultaneously benefit the shareholders with steadily rising dividends.

Health Care REIT reported record levels of medical office occupancy at 93.4% during the year and a retention rate of 79.3%. Same-store cash net operating income in the reported quarter increased 4.0% on a year-over-year basis. The company received $415 million in proceeds from asset sale during the reported year, generating a profit of $61 million.

During the reported fiscal, Health Care REIT raised over $4 billion capital from debt and equity offering, including $700 million in fourth quarter 2011. At year-end 2011, the company had cash and cash equivalents of $163.5 million and total debt of $7.2 billion.

Health Care REIT declared fourth quarter 2011 dividend of 74 cents per share, which marked the 163rd consecutive quarterly dividend payment for the company. For full year 2012, the company has announced an annualized dividend of $2.96 per share, representing a 4% year-over-year increase.

For full year 2012, Health Care REIT expects recurring FFO in the range of $3.68 – $3.78 per share. The FFO guidance is based on the assumptions of funded new developments of $248 million during the year and asset sale of $200 million at an average yield of approximately 11%.

For the long term, we maintain our Neutral recommendation on Health Care REIT, which presently has a Zacks #3 Rank translating into a short-term Hold rating. We also have a Neutral recommendation and a Zacks #3 Rank for HCP Inc. (HCP), a competitor of Health Care REIT.

 
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