Ventas is a real estate investment trust (REIT) that owns a portfolio of seniors housing and healthcare properties located in the U.S., Canada and the U.K.
|Most recent||Growth rate (CAGR)|
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|Book value of equity per share||$30.14||2.7%||-0.2%||7.7%|
|BV including aggregate dividends||13.4%||8.2%||14.7%|
|1 year||5 years||10 years|
|Most recent||Growth rate (CAGR)|
|1 year||5 years||10 years|
|1 year||5 years||10 years|
A company creates wealth for its long-term shareholders in 2 main ways - through dividend payments and through the accumulation of retained earnings. This graph shows the accumulation of per-share equity of long-term shareholders (green bars), which consists of the retained earnings plus all capital invested in the company, and the cumulative dividends the company has paid over time per share of its stock (blue bars).
In the words of Warren Buffett: "We're looking for... businesses earning good returns on equity while employing little or no debt."
Return on equity is a key metric of financial performance, indicating a company's ability to generate earnings using shareholder capital. Over time, ROE is one of the major determinants of the rate at which a company creates shareholder wealth. The average ROE for large U.S. companies is 12%, and many investors use it as a threshold for attractive investments.
Companies can boost ROE by increasing leverage, which reduces the safety of the investment. Therefore, it is useful to look at the return on assets (ROA), which measures a company's earning power regardless of its capital structure. A widening gap between ROE and ROA may be a warning sign that should be thoroughly investigated.
Earnings per share is a popular metric used to value a company (using P/E ratio); growth in EPS is often used to judge company growth potential. However, many investors believe that EPS is an inferior metric to ROE, because it ignores the amount of capital the company used to generate earnings.
Free cash flow shows how much cash a company generates from operations, above and beyond what is required to maintain or expand its productive assets. This cash can be returned to investors, or spent by management on growing the company or paying back its debts.
Balance sheets of many companies contain intangible assets such as goodwill, trademarks, patents, etc. Many investors consider intangibles more difficult to value than physical assets. If intangible assets had been valued incorrectly, they must be impaired, resulting in a loss charged against shareholder equity. This chart demonstrates the potential loss to shareholder equity from such impairments.
Companies often use debt financing to increase their return on equity. However, as the amount of debt financing increases relative to the amount of equity financing, the company becomes more sensitive to down turns and other negative events. As a result, many investors use the ratio of debt to equity as a measure of a company's financial risk, and avoid companies that have this ratio above 1.
This chart shows shareholder equity as a percentage of total assets, allowing investors to judge the overall leverage. Companies with a higher proportion of equity can be viewed as safer investments. This metric is particularly important for highly leveraged institutions, such as banks, where it must be at least 4% according to government regulations.
This chart shows the cumulative dilution of investor ownership in a company over time. Dilution reduces an investor's participation in the future earnings. Dilution increases when a company issues new shares, and decreases when a company buys its shares back. Many investors avoid companies with large chronic dilution.
analysis provides insight into factors affecting the Return On Equity of a company.
The DuPont equation decomposes ROE as follows:
ROE = (Net margin) * (Asset turnover) * (Asset to equity ratio)
Net margin indicates operating efficiency, Asset turnover measures the total asset use efficiency, and the Asset to equity ratio is a measure of financial leverage.
The dividend payout ratio tells investors what percentage of earnings a company returns to shareholders, and what percentage it retains and reinvests. This ratio represents a major capital allocation decision by the company, and can be used to judge management rationality. Rational management should pay out all earnings that cannot be productively reinvested. Therefore, a low dividend payout ratio for a profitable company with a low growth potential may be a warning sign.
Many investors use the P/B ratio as a quick way of judging company valuation. Value investors - followers of Graham and Dodd - specifically seek out companies with low P/B ratios. However, investors should be careful not to make investment decisions on this metric alone, without considering a company's earning and growth potential, since a low P/B ratio can be a sign of a bleak future for the business.
P/E ratio is a popular way of making a quick judgment of a company valuation. Value investors - followers of Graham and Dodd - often seek solid companies with low P/E ratios as investment opportunities. However, P/E ratio represents an oversimplified approach to business valuation, and can often lead to incorrect investment decisions.
Kindred and the Company were the subject of investigations by the United States Department of Justice regarding the Company's prior healthcare operations, including matters arising from lawsuits filed under the qui tam, or whistleblower, provision of the Federal Civil False Claims Act, which allows private citizens to bring a suit in the name of the United States. The Kindred Reorganization Plan contains a comprehensive settlement of all of these claims by the United States (the "United States Settlement"). Under the United States Settlement, the Company will pay $103.6 million to the United States.
During the fourth quarter ended December 31, 2002, the Company commenced and completed an equity offering of the Company's common stock with Tenet Healthcare Corporation ("Tenet"). Immediately prior to the completion of the Equity Offering, Tenet held 8,301,067 shares of Ventas common stock. The Equity Offering consisted of 9,000,000 newly issued shares of common stock sold by Ventas and 8,301,067 shares of Ventas common stock owned and sold by Tenet, all priced at $11.00 per share. After the Equity Offering, Tenet held no shares of Ventas common stock. The net proceeds received by Ventas from its sale of its newly issued common stock were $93.6 million and were used to repay outstanding indebtedness, including the indebtedness incurred by the Company to invest in the THI Transaction.
On June 7, 2005, we completed the acquisition of Provident (the "Provident Acquisition") in a transaction valued at approximately $1.2 billion. Provident was formed as a Maryland real estate investment trust in March 2004 and owned senior living properties located in the United States. Pursuant to the Provident Acquisition, we acquired 68 independent or assisted living facilities in 19 states comprised of approximately 6,819 residential living units all of which are leased to affiliates of Brookdale and Alterra pursuant to triple-net leases with renewal options. As of June 30, 2005, the aggregate 2005 contractual cash rent expected from the Provident properties was approximately $83.2 million. We funded the cash portion of the purchase price for the Provident Acquisition, which was approximately $231.0 million, and repaid all outstanding borrowings under Provident's credit facility at closing from a combination of net proceeds from the sale of $350 million aggregate principal amount of senior notes, comprised of $175 million aggregate principal amount of 6 3/4% Senior Notes due 2010 (the "2010 Senior Notes") and $175 million aggregate principal amount of 7 1/8% Senior Notes due 2015 (the "2015 Senior Notes"), issued by Ventas Realty and a wholly owned subsidiary, Ventas Capital Corporation ("Ventas Capital" and, together with Ventas Realty, the "Issuers"), and borrowings under our revolving credit facility. Additionally, we issued approximately 15.0 million shares of common stock and share equivalents to Provident equity holders as part of the purchase price for the Provident Acquisition. We also assumed approximately $459.4 million of property-level mortgage debt.
On June 29, 2005, we agreed to sell 3.2 million shares of our common stock in an underwritten public offering under our universal shelf registration statement. At June 30, 2005, we recorded this transaction as subscriptions receivable on our consolidated balance sheet. We received $97.0 million in net proceeds from the sale on July 6, 2005, which we used to repay indebtedness under our revolving credit agreement. Following completion of the offering approximately $500.0 million of securities remains available for offering under the universal shelf registration statement.
On April 26, 2007, we completed the acquisition of all of the assets of Sunrise REIT. The aggregate consideration for the Sunrise REIT Acquisition, including the assumption of debt, was approximately $2.0 billion. We funded the Sunrise REIT Acquisition through $530.0 million of borrowings under a senior interim loan, an equity-backed facility providing for the issuance of 700,000 shares of our Series A Senior Preferred Stock, with a liquidation preference of $1,000 per share, and the assumption of $861.1 million of existing mortgage debt.
In May 2007, we completed the sale of 26,910,000 shares of our common stock in an underwritten public offering pursuant to our shelf registration statement. We received $1.05 billion in net proceeds from the sale, which we used along with the proceeds of the disposition of the Kindred assets and borrowings under our unsecured revolving credit facility to redeem all of our Series A Senior Preferred Stock and to repay our indebtedness under the senior interim loan.
In April 2009, we completed the sale of 13,062,500 shares of our common stock in an underwritten public offering pursuant to the shelf registration statement. We received $299.7 million in net proceeds from the sale, which we used, together with our net proceeds from the sale of the 2016 Notes, to fund our cash tender offers with respect to the outstanding senior notes of the Issuers, to repay debt and for general corporate purposes.
On May 12, 2011, we acquired substantially all of the real estate assets and working capital of privately-owned Atria Senior Living for a total purchase price of $3.4 billion, which we funded in part through the issuance of 24.96 million shares of our common stock (which shares had a total value of $1.38 billion based on the May 12, 2011 closing price of our common stock of $55.33 per share). As a result of the transaction, we added to our senior living operating portfolio 117 private pay seniors housing communities and one development land parcel located primarily in affluent coastal markets such as the New York metropolitan area, New England and California. Prior to the closing, Atria Senior Living spun off its management operations to a newly formed entity, Atria, which continues to operate the acquired assets under long-term management agreements with us. For both the three and six months ended June 30, 2011, we recorded revenues and NOI from the acquired assets of $85.7 million and $26.2 million, respectively.
On July 1, 2011, we acquired NHP in a stock-for-stock transaction. Pursuant to the terms and subject to the conditions set forth in the agreement and plan of merger dated as of February 27, 2011, at the effective time of the merger, each outstanding share of NHP common stock (other than shares owned by us or any of our subsidiaries or any wholly owned subsidiary of NHP) was converted into the right to receive 0.7866 shares of our common stock, with cash paid in lieu of fractional shares. As a result of the transaction, we added 654 seniors housing and healthcare properties to our portfolio. Since the transaction was consummated after June 30, 2011, we recognized no revenues or NOI from NHP's operations for the three and six months ended June 30, 2011. We are accounting for the NHP acquisition under the acquisition method in accordance with ASC 805. The preliminary purchase price is being allocated among tangible and intangible real estate assets ($8.4 billion), other liabilities, net ($0.8 billion), debt ($2.2 billion) and equity issued ($5.4 billion). On July 1, 2011, in connection with the NHP acquisition, we issued 99,849,106 shares of our common stock to NHP stockholders and holders of NHP equity awards, and reserved 2,253,366 additional shares of our common stock for issuance in connection with equity awards and other convertible or exchangeable securities that we assumed in connection with the transaction.
In March 2013, we established an "at-the-market" ("ATM") equity offering program through which we may sell from time to time up to an aggregate of $750 million of our common stock. During the year ended December 31, 2014, we issued and sold a total of 3,381,678 shares of common stock under the program for aggregate net proceeds of $242.3 million (all of which was received in the fourth quarter of 2014), after sales agent commissions of $3.7 million. As of December 31, 2014, approximately $360.4 million of our common stock remained available for sale under our ATM equity offering program. In January 2015, we issued and sold a total of 3,750,202 shares of common stock under the ATM program for aggregate net proceeds of $285.8 million, after sales agent commissions of $4.4 million.