Recent Buy
I try to be as open and transparent as I can with my investing decisions in order to give a real life example of what it takes in order to become financially independent through dividend growth investing. In order to keep track of my reasoning behind a purchase and inform you all about what's catching my eye, I have my Recent Buy series. This allows me to have a written record as to why I made a purchase for my portfolio and be able to look back and see if that holding is still serving its purpose. On Wednesday I decided to continue building my budding real estate empire by purchasing 100 shares of the diversified REIT, American Realty Capital Properties (ARCP).
ARCP is quickly becoming the largest player in the triple-net REIT space by acquiring both public and private trusts. Earlier this year they completed the acquisition of ARCT III and are very close to finishing up the acquisition of ARCT IV and CapLease, Inc. If the last two finish before November 9th the new annualized dividend rate will jump from $0.91 to $0.94 for the December 2013 payout. A few weeks back they also announced a merger with their long sought after target of Cole Real Estate Investment, Inc. Cole just recently become a publicly traded REIT itself and ARCP's mangement has stated that the merger is expected to close in early 2014 and the new annual dividend rate will be $1.00.
I'm curious to see how ARCP's dividend will increase once the acquisitions slow down as they are muddying the waters in what would be organic growth. The thing I like most about investing in eREITs is that you are investing in hundreds and thousands of companies. Here's a short list of some of the companies you're siding with after the ARCP and Cole merger: Walgreens, AT&T, CVS, Dollar General, FedEx, Petsmart, Albertson's, Family Dollar and the list continues on and on. Through all of ARCP's M&A's they will now be the the largest triple-net REIT by a significant margin and have great diversification with their property portfolio breakdown composing of 51.1% single tenant retail, 23.9% single tenant office, 13.9% single tenant industrial/distribution, and 11.1% multi-tenant retail. The plan was to diversify away from strictly retail and ARCP has done just that.
I purchased 100 shares of ARCP for $13.40 each. After commission, my per share cost basis is $13.48 and based on the current annual dividend of $0.91 per share these shares carry a 6.75% YOC and will provide $91.00 in annual dividends before future increases. As mentioned above there's two increases that can be expected just from operational growth due to the mergers and acquisitions. After all of them are completed and the dividend is increased to $1.00 per share, the YOC will jump to 7.42%. Another big plus to ARCP's dividend policy is, that like Realty Income, they pay on a monthly basis. If I had my choice every position I owned would pay monthly as it allows for quicker compounding. Based on management's guidance of $1.13 to $1.19 AFFO per share in 2014, these shares were purchased at a compelling P/AFFO ratio of 11.93 - 11.33. Seeing as how all of their financial metrics should improve significantly after the merger I expect to see ARCP's P/AFFO ratio to be more in line with it's peers as it's currently trading at a discount.
I've updated my Portfolio page to reflect this addition.
ARCP is quickly becoming the largest player in the triple-net REIT space by acquiring both public and private trusts. Earlier this year they completed the acquisition of ARCT III and are very close to finishing up the acquisition of ARCT IV and CapLease, Inc. If the last two finish before November 9th the new annualized dividend rate will jump from $0.91 to $0.94 for the December 2013 payout. A few weeks back they also announced a merger with their long sought after target of Cole Real Estate Investment, Inc. Cole just recently become a publicly traded REIT itself and ARCP's mangement has stated that the merger is expected to close in early 2014 and the new annual dividend rate will be $1.00.
I'm curious to see how ARCP's dividend will increase once the acquisitions slow down as they are muddying the waters in what would be organic growth. The thing I like most about investing in eREITs is that you are investing in hundreds and thousands of companies. Here's a short list of some of the companies you're siding with after the ARCP and Cole merger: Walgreens, AT&T, CVS, Dollar General, FedEx, Petsmart, Albertson's, Family Dollar and the list continues on and on. Through all of ARCP's M&A's they will now be the the largest triple-net REIT by a significant margin and have great diversification with their property portfolio breakdown composing of 51.1% single tenant retail, 23.9% single tenant office, 13.9% single tenant industrial/distribution, and 11.1% multi-tenant retail. The plan was to diversify away from strictly retail and ARCP has done just that.
I purchased 100 shares of ARCP for $13.40 each. After commission, my per share cost basis is $13.48 and based on the current annual dividend of $0.91 per share these shares carry a 6.75% YOC and will provide $91.00 in annual dividends before future increases. As mentioned above there's two increases that can be expected just from operational growth due to the mergers and acquisitions. After all of them are completed and the dividend is increased to $1.00 per share, the YOC will jump to 7.42%. Another big plus to ARCP's dividend policy is, that like Realty Income, they pay on a monthly basis. If I had my choice every position I owned would pay monthly as it allows for quicker compounding. Based on management's guidance of $1.13 to $1.19 AFFO per share in 2014, these shares were purchased at a compelling P/AFFO ratio of 11.93 - 11.33. Seeing as how all of their financial metrics should improve significantly after the merger I expect to see ARCP's P/AFFO ratio to be more in line with it's peers as it's currently trading at a discount.
This purchase increased the YOC for my FI Portfolio from 3.36% to 3.42%. My FI Portfolio's forward 12-month dividends now sit at $3,205.99 which is 91.6% of the way towards my goal of $3,500 by the end of 2013.
I've updated my Portfolio page to reflect this addition.
Big fan of this purchase! It appears ARCP is really striving to be the top dog in the triple net leasing environment, and I think they will be successful in this regard. I was lucky to get in earlier this year and would be thrilled if they could up their distributions to $1 per share annually. As you've mentioned, the next test will be to see how they grow and manage a more static portfolio without the rapid growth. But I'm happy to compound that stable monthly income in the mean time!
ReplyDeletew2r,
DeleteUnfortunately it almost seems like they're obsessed with it. I'm hoping the M&A will slow down some while all the recent M&A is able to become fully integrated.
They've already announced that it'll be $0.94 (annual basis) after the ARCT IV and CapLease finalizes and after Cole finalizes it'll jump to $1 (annual basis). So as long as all of the M&A is completed we should see that $1 per share sometime early next year.
I know O's dividend isn't as frothy, but there's something to be said about a company as consistent as O at delivering shareholder returns. I'm glad that I should be increasing that stake before the end of the year assuming O doesn't jump up to over $45.
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Pursuit,
ReplyDeleteI like it. I purchased ARCP not too long ago myself. The rapid growth concerns some, but I think if anyone can handle it they can. It looks like there will be some synergies realized through this and you have to love that dividend growth on the back of what is already a huge dividend. I only purchased 100 shares because I'm a little concerned about the short history, but so far I like what they're doing.
Best wishes.
DM,
DeleteThey're projecting $70 million in cost savings due to synergies which is quite a large amount. The short public history is also something I'm concerned about but I'll give them a shot. I'd like to see the acquisitions slow down to see what organic growth of the company would be like.
Thanks for stopping by!
I also purchased some more shares last week. I really like where they are heading. Time will tell.
ReplyDeleteFFDividend,
DeleteI wouldn't mind adding some more shares if the price comes down a bit. They are set up to do well, now it's a matter of execution.
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