Finding buy-and-forget investments providing dividends that are more than likely to rise over time is no easy matter. Add to this, a reasonable assurance that a company’s product or service will continue to be in vogue over time, and you have precious few stocks to settle on. If you have been searching for such a stock, Primary Health Properties (LSE: PHP) may be right up your street.
Let’s begin with the company’s business model. The principal activity of the company is the acquisition of healthcare property in the United Kingdom and the Republic of Ireland. Specifically, it focuses on the ownership of freehold or long leasehold interests in purpose-built healthcare facilities, which are leased to general practitioners, government healthcare bodies and other associated healthcare users. As you may correctly surmise, the ultimate guarantor of rents paid is the government; certainly an added bonus.
Those familiar with Warren Buffett will know that one of the key requisites for any of his investments is a top-drawer CEO. It is easy to understand why, since in the long term, profitability cannot be sustained with poor management. At the helm of Primary Health Properties is just such a consummate professional in the shape of Harry Hyman. This Cambridge-educated accountant founded the company in 1996 and has been the managing director ever since.
The management team at PHP have consistently driven the company from success to success. This has been true during good times and bad. Whilst the financial meltdown in 2008 is becoming a distant memory, it’s worth remembering that during this period, PHP increased its dividend and annual revenue improved.
More recently, Hyman and his talented crew have shown conspicuous ability. Upon review of the 2013 annual report, the company had a portfolio of 259 properties worth £941.6 million, a revenue of £42 million and an annual dividend of 4.8p a share. According to the most recent annual report released in February 2019, total assets are now valued at £1.5bn, revenue is around £76.4 million and the dividend has increased to 5.4p per share. Particularly noteworthy for dividend investors, the increase in payout represents an average annual increase of 2.1%.
Those who have been followers of this company may remember the merger that took place in 2013 between PHP and Prime Public Partnership (PPP). At that time, PPP was around a third of the size of PHP. This union produced numerous cost benefits, which have led to positive rewards for shareholders. The experience gained by Hyman’s team will now be applied to the recently announced merger with MedicX.
Given PHP’s business model and the success of the PPP acquisition, it would seem an opportune time to consider PHP for the long haul.