Canadian Healthcare for income

Discuss your favourite picks, broker, and trading or investment style.
JaydoubleU
Veteran Contributor
Veteran Contributor
Posts: 3103
Joined: 13 Sep 2007 22:52

Canadian Healthcare for income

Post by JaydoubleU »

I couldn't find a thread that attempted to focus on healthcare INCOME specifically from Canadian sources. What I have in mind here are the following stocks: Extendicare (EXI), Sienna (SIA), Medical Facilities (DR), and Chartwell (CSH.UN). Of these, only Chartwell seems to offer any dividend growth; the others offer steady distributions but there haven't been increases for years . The highest yield is DR, but it hasn't done so well YTD. I am just wondering if anyone can add to the list or express preferences and explain why. I might be interested in investing in this sector but I am not sure what to like here (if anything) or what I should be looking for.
2 yen
Veteran Contributor
Veteran Contributor
Posts: 4116
Joined: 09 Apr 2005 09:15

Re: Canadian Healthcare for income

Post by 2 yen »

JaydoubleU wrote: 09 Jun 2017 09:13 I couldn't find a thread that attempted to focus on healthcare INCOME specifically from Canadian sources. What I have in mind here are the following stocks: Extendicare (EXI), Sienna (SIA), Medical Facilities (DR), and Chartwell (CSH.UN). Of these, only Chartwell seems to offer any dividend growth; the others offer steady distributions but there haven't been increases for years . The highest yield is DR, but it hasn't done so well YTD. I am just wondering if anyone can add to the list or express preferences and explain why. I might be interested in investing in this sector but I am not sure what to like here (if anything) or what I should be looking for.
Chartwell is a very well managed company and of the 4 would be my first choice. You are right about the dividend increases. Sienna is my second choice - the former Leisureworld. They are also growing with recent purchases and I think raised the dividend by a small amount about a year ago (?). They also appear to be very well run. By coincidence I looked at Extendicare yesterday. They are more of an income oriented stock in my opinion, not sure about recent growth. I would hold all three of these as income oriented stocks with a little bit of growth added in. Interest rate rises may hinder / stop dividend growth, however. Medical Facilities is also growing in the U.S. and seem to attract very high quality management who have retired or are nearing the end of their careers from large health care systems. That said, they are the riskiest of the 4 in terms of maintaining the dividend. The only one I don't own is Extendicare, but am considering it for part of a GIC that matures next year. If BNN Market Call and Market Call Tonight are anything to go by, their analysts / promotors seem to rank them in this order: Chartwell, Sienna, Extendicare, Medical facilities. The multi-billion dollar wealth transfer through inheritances taking place in North America bodes well for a large chunk of the current pre-retirement demographic to be able to afford these facilities. Personally, I think this sector may boom for the next 30 years.

Good luck deciding.

2 yen
Last edited by 2 yen on 09 Jun 2017 10:56, edited 1 time in total.
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33398
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: Canadian Healthcare for income

Post by AltaRed »

Not sure I consider stocks like EXI or CSH.UN healthcare stocks. They are REIT type entities. There is always Valeant and Concordia? :shock:

And the TSX Capped Healthcare index has Canopy in it. :shock: There is not much to pick from... perhaps some small biotechs.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
2 yen
Veteran Contributor
Veteran Contributor
Posts: 4116
Joined: 09 Apr 2005 09:15

Re: Canadian Healthcare for income

Post by 2 yen »

AltaRed wrote: 09 Jun 2017 10:56 Not sure I consider stocks like EXI or CSH.UN healthcare stocks. They are real estate (REIT) type entities. There is always Valeant and Concordia? :shock:

And the TSX Capped Healthcare index has Canopy in it. :shock: There is not much to pick from... perhaps some small biotechs.

Yes. View them as specialized real estate. That will help keep the interest rate risk in focus, too.

2 yen
JaydoubleU
Veteran Contributor
Veteran Contributor
Posts: 3103
Joined: 13 Sep 2007 22:52

Re: Canadian Healthcare for income

Post by JaydoubleU »

And the TSX Capped Healthcare index has Canopy in it. :shock:
You're joking! Just to be clear, when I am immobile in my hospital bed, I do NOT want a big reefer placed between my trembling lips for my health or relaxation.

I get the issue on REITs and understand the interest rate risk. The idea of holding 2-3 of these is a good one, though I wish they offered higher and more regular dividend growth! I shifted my portfolio emphasis last year away from higher, static yields in the direction of lower yields with stronger dividend growth, and I'm not sure how much I want to go back. DR is an attractive dividend, mind you. No sure why it has underperformed so much YTD.

One would think that of all the growth areas to look for in the coming years, demographics and the healthcare sector would be a no-brainer.
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33398
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: Canadian Healthcare for income

Post by AltaRed »

The S&P/TSX Capped Healhcare Index has 6 constituents, including WEED. No kidding. I only mentioned it to demonstrate Canada does not have much of healthcare sector. It is NOT a no-brainer despite demographics because the effect of demographic change is so slow that investors don't have the patience to wait 10 years for it to show disproportionate growth. Some of it is already built in too with all that has been written about it. Anecdote: I am near the front end of the boomer demographic (currently 68). I am hoping NOT to have to spend much on healthcare or a Chartwell facility for about another 10 years. Does that put it in perspective?

A comment on CSH.UN. I have followed it for 2 years and missed the boat when it dipped into the $10 range when it was closing on the sale of its US interests and didn't have profitable entities to re-invest the proceeds at that time. Now that REIT sector is very expensive with high valuations....driven mostly by American companies kicking the tires on possible Canadian acquisitions. I keep it on my Watchlist but do'n't have much prospect of getting in.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
User avatar
deaddog
Veteran Contributor
Veteran Contributor
Posts: 3422
Joined: 19 Jan 2008 19:59
Location: Central BC/Arizona

Re: Canadian Healthcare for income

Post by deaddog »

AltaRed wrote: 09 Jun 2017 10:56 There is always Valeant and Concordia? :shock:
I picked up some VRX the other day. It stopped dropping and started going up. :D
"And the days that I keep my gratitude higher than my expectations, well, I have really good days" RW Hubbard
JaydoubleU
Veteran Contributor
Veteran Contributor
Posts: 3103
Joined: 13 Sep 2007 22:52

Re: Canadian Healthcare for income

Post by JaydoubleU »

Anecdote: I am near the front end of the boomer demographic (currently 68). I am hoping NOT to have to spend much on healthcare or a Chartwell facility for about another 10 years. Does that put it in perspective?
Well, I read recently that 2017 marks the year the first Boomers turn 70 (1947 to 1967?), and so the great retirement wave has begun but the great aging wave is only just beginning. But you're right: it might be a while yet; I don't regard 70 as being especially old. (In Japan 65-70 is seen as an appropriate age to retire and begin a new job!)
User avatar
Wallace
Veteran Contributor
Veteran Contributor
Posts: 2422
Joined: 30 Nov 2005 19:05
Location: Waterloo Ont
Contact:

Re: Canadian Healthcare for income

Post by Wallace »

One of the issues with companies like Chartwell is that they are under increasing government regulation. Many are continuous care organisations, where there are units that cater to seniors who are completely financially and medically independent, next to units that have additional nursing and supervisory care for those who need it, next to facilities catering to residents who need 24 hour medical and nursing supervision. The latter, long term care - previously "nursing homes" - is mostly funded by government. Having worked in LTC for 16 years I'm well aware of the amount of regulation and the stringent funding mechanisms that complicate these investments. The government simply will not allow LTC facilities to make significant profits. It is also generally known in the LTC community that the same regulations that now apply to LTC will soon apply to the second level of retirement homes. The process of regulating these homes is underway right now.
Nevertheless I have Chartwell in my TFSA, mostly for the dividend and diversification it provides. I wouldn't buy any more at this price, but I don't intend to sell either.
I would keep my ear to the ground. Right now the government realises that no-one will build if they can't make a reasonable profit, but they could quite easily put the squeeze on for political reasons once there is an adequate number of facilities built.
I guess what I'm saying is that it is definitely a Real estate investment but there is a significant health care component and MOH is always in the background.
"Why do I have to go to school? If I watch YouTube I'll know everything."
- Grandson #2
pmj
Veteran Contributor
Veteran Contributor
Posts: 3412
Joined: 27 Feb 2005 18:15
Location: Ottawa

Re: Canadian Healthcare for income

Post by pmj »

I'm sceptical that with the increasing demand, heavy regulation, onerous permit process, etc, etc, that "an adequate number" will be a long time coming. Notwithstanding that there is need for more and better facilities, the various governments will have to tread very carefully if they actually want more facilities to be built.
Peter

Patrick Hutber: Improvement means deterioration
Thegipper
Veteran Contributor
Veteran Contributor
Posts: 3477
Joined: 14 Mar 2015 16:58

Re: Canadian Healthcare for income

Post by Thegipper »

Wallace wrote: 09 Jun 2017 15:38 One of the issues with companies like Chartwell is that they are under increasing government regulation. Many are continuous care organisations, where there are units that cater to seniors who are completely financially and medically independent, next to units that have additional nursing and supervisory care for those who need it, next to facilities catering to residents who need 24 hour medical and nursing supervision. The latter, long term care - previously "nursing homes" - is mostly funded by government. Having worked in LTC for 16 years I'm well aware of the amount of regulation and the stringent funding mechanisms that complicate these investments. The government simply will not allow LTC facilities to make significant profits. It is also generally known in the LTC community that the same regulations that now apply to LTC will soon apply to the second level of retirement homes. The process of regulating these homes is underway right now.
Nevertheless I have Chartwell in my TFSA, mostly for the dividend and diversification it provides. I wouldn't buy any more at this price, but I don't intend to sell either.
I would keep my ear to the ground. Right now the government realises that no-one will build if they can't make a reasonable profit, but they could quite easily put the squeeze on for political reasons once there is an adequate number of facilities built.
I guess what I'm saying is that it is definitely a Real estate investment but there is a significant health care component and MOH is always in the background.
Good point . They sucker private investment into the sector and once the capacity is in place they use regulation and taxation to take away any profits. I will stay away from this sector.
JaydoubleU
Veteran Contributor
Veteran Contributor
Posts: 3103
Joined: 13 Sep 2007 22:52

Re: Canadian Healthcare for income

Post by JaydoubleU »

Good point . They sucker private investment into the sector and once the capacity is in place they use regulation and taxation to take away any profits. I will stay away from this sector.
You make it sound as though it is some kind of conspiracy, with "they" being a clearly understood entity acting consciously to lure and deceive unknowing investors.... What's the difference between privately owned and regulated old age homes and privately owned and regulated power utilities, the latter granted a certain level of ROE and investors ensured a predictable ROI? Sienna, Chartwell and Extendicare depend to a degree on government financing and regulation, and yet they are able to generate profits for shareholders. The alternative is that government owns and operates everything (like hospitals?) and is that the best way to ensure the best care for the most people with the least amount of money?
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33398
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: Canadian Healthcare for income

Post by AltaRed »

Think the difference is essentially a 'regulated' rate of return vs what the market will bear. Generally speaking, the regulated entity will never make exorbitant profits but have a 'steady eddy' return on investment, while the private market is true capitalist. There is a place for both and I believe Chartwell is in both parts of the business. Most investors would be happy with a 8-10% rate of return given relative certainty of cash flow. The increasing use of PPP projects kind of attests to that. Not a bad deal overall.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
JaydoubleU
Veteran Contributor
Veteran Contributor
Posts: 3103
Joined: 13 Sep 2007 22:52

Re: Canadian Healthcare for income

Post by JaydoubleU »

Also there is a need for a regulator there to prevent private interests from gouging people or taking unfair advantage of their monopolistic position as sole or limited provider of "essential services." The utility model seems to work fairly well, with a regulated balance between providers and users, supply and demand. Why should healthcare services be different? Government might own and operate these services at cost, but government itself recognizes that it is not the most efficient manager of capital. So they open the market to competition, while maintaining some oversight to see that helpless old folks don't get burned. Anyway, yeah, 8-10% highly predictable ROI sounds pretty good to me.
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33398
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: Canadian Healthcare for income

Post by AltaRed »

JaydoubleU wrote: 09 Jun 2017 20:24 Anyway, yeah, 8-10% highly predictable ROI sounds pretty good to me.
If that is what it is/would be. That was a guess on my part.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
User avatar
Wallace
Veteran Contributor
Veteran Contributor
Posts: 2422
Joined: 30 Nov 2005 19:05
Location: Waterloo Ont
Contact:

Re: Canadian Healthcare for income

Post by Wallace »

AltaRed wrote: 09 Jun 2017 19:51 Think the difference is essentially a 'regulated' rate of return vs what the market will bear. Generally speaking, the regulated entity will never make exorbitant profits but have a 'steady eddy' return on investment, while the private market is true capitalist. There is a place for both and I believe Chartwell is in both parts of the business. Most investors would be happy with a 8-10% rate of return given relative certainty of cash flow. The increasing use of PPP projects kind of attests to that. Not a bad deal overall.
Yes, I agree. The continuous care model is appearing over and over again. University Gates is the latest in the Waterloo area. The profit comes mainly from seniors who may have a defined medical condition but are completely independent and who are essentially living a condominium-style life, with access to nursing and physician care when they need it. But if their condition progresses they will still have increased care within the same facility. There is definitely a market for this type of facility. Winston Park, the one with which I was connected, has over 2,000 people on its waiting list at the present time. So the demand is there, and it definitely allows the owners to make up for the regulations on the LTC side with competitive pricing on the condo side. These units don't come cheap.
There is still the potential for LTC to become a political football at some point, so it's worth keeping in mind. BTW, the two facilities I mention are not Chartwell. They are owned by the Schlegel family.
"Why do I have to go to school? If I watch YouTube I'll know everything."
- Grandson #2
Thanh
Contributor
Contributor
Posts: 128
Joined: 15 Jun 2013 22:34

Re: Canadian Healthcare for income

Post by Thanh »

I know the thread was about healthcare and then became about retirement home REIT's but we can also NorthWest Healthcare in this discussion since it owns medical buildings including many hospitals.
JaydoubleU
Veteran Contributor
Veteran Contributor
Posts: 3103
Joined: 13 Sep 2007 22:52

Re: Canadian Healthcare for income

Post by JaydoubleU »

Wallace, your insights are very interesting, thanks. Can you give us an idea of what "not cheap" means? I had a look at the schlegelvillages.com website, but I don't see any info about pricing. At any rate this is not something "we" can invest in.

Northwest Healthcare Properties (NWH.UN). Also interesting. I've added it to my watchlist. Analysts seem rather vague on it because it owns various properties in countries such as Brazil and New Zealand where they don't know the system. But it seems to have paid a steady distribution of 0.80 / unit / year for the last five years at least: http://quote.morningstar.ca/Quicktakes/ ... ture=en-CA
Last edited by JaydoubleU on 12 Jun 2017 10:44, edited 1 time in total.
User avatar
kcowan
Veteran Contributor
Veteran Contributor
Posts: 16033
Joined: 18 Apr 2006 20:33
Location: Pacific latitude 20/49

Re: Canadian Healthcare for income

Post by kcowan »

Even though my REITS are at my AA, I am also looking at this (NWH) because of its diversification. It seems to be on a solid up trend.
For the fun of it...Keith
pmj
Veteran Contributor
Veteran Contributor
Posts: 3412
Joined: 27 Feb 2005 18:15
Location: Ottawa

Re: Canadian Healthcare for income

Post by pmj »

DW has NWH.UN.
Annual dividend = $0.80, unchanged since inception in March 2010.
It was a bit of a value trap from mid 2012 to early 2016, when its value declined with each div payment. Almost sold it a couple of times.

GlobeInvestor graph shows $10k invested at inception (red line = original cost minus total of dividend payments).
NWHUN.png
NWHUN.png (5.71 KiB) Viewed 831 times
Peter

Patrick Hutber: Improvement means deterioration
User avatar
kcowan
Veteran Contributor
Veteran Contributor
Posts: 16033
Joined: 18 Apr 2006 20:33
Location: Pacific latitude 20/49

Re: Canadian Healthcare for income

Post by kcowan »

This is their holdings by geography from Sedar:
NWH-Holdings.jpg
so Canada is about 40%, and Germany is tiny.

Obviously there is debt galore throughout their world. Canada followed by Germany.

It seems that their acquisitions last year are driving the positive growth. I would expect that any asset acquisition will adversely impact their share growth for a quarter at least. Here is the country analysis:
NWH-Geography.jpg
For the fun of it...Keith
JaydoubleU
Veteran Contributor
Veteran Contributor
Posts: 3103
Joined: 13 Sep 2007 22:52

Re: Canadian Healthcare for income

Post by JaydoubleU »

Medical Facilities (DR): sudden resignation of the CEO. Not usually a good sign:

https://www.theglobeandmail.com/feeds/p ... PR_C5758-1
User avatar
kcowan
Veteran Contributor
Veteran Contributor
Posts: 16033
Joined: 18 Apr 2006 20:33
Location: Pacific latitude 20/49

Re: Canadian Healthcare for income

Post by kcowan »

NWH the dividend coverage was 89% is the latest reporting. I suppose this is a debt-ridden business by the nature of their holdings. Higher mortgages in Brazil would help a lot. Their convertible debentures are trading in the $102-104 range, giving them a yield in the 4.1 to 4.5% per year versus their posted rate of 5.25 and 5.5% so obviously someone loves them. But they are paying a lot for their debt.

The current yield on the dividend is 7.4% so obviously there is a big premium for risk. I wonder if those Australasian acquisitions have turned them around?
For the fun of it...Keith
milton
Contributor
Contributor
Posts: 147
Joined: 16 Feb 2007 15:33

Re: Canadian Healthcare for income

Post by milton »

Could K-Bro Linen be considered a healthcare stock? They specialize in cleaning linen for the healthcare and hospitality industries. As the germs get bigger and badder, hospitals are turning to more and more sophisticated ways of keeping the linens clean. Yields 3%
JaydoubleU
Veteran Contributor
Veteran Contributor
Posts: 3103
Joined: 13 Sep 2007 22:52

Re: Canadian Healthcare for income

Post by JaydoubleU »

Could K-Bro Linen be considered a healthcare stock?
Why not. I think our little "Canadian healthcare income ETF" needs all the constituents it can get! K-bro was one I had my eye on a few years ago but never pulled the trigger. The fact that they handle the linen for hospitals involves them in this industry, just as much as do the REITs that cater to healthcare and / or seniors, I would argue.
Post Reply