Investment thesis

We believe the Real Health Realty Universal Investment Fund (UHT) will do well either through organic growth over the next few decades or possibly through a larger REIT. We believe that, in one way or another, UHT is a speculative REIT that requires you to wait. We think investors should wait until the price comes a little before buying, but in the long run, we have very high hopes for the UHT.

Why UHT Unique?

Universal Health Realty Income Trust is a small operator based in King of Prussia, Pennsylvania. Basically, we mean that the UHT has a market capitalization of just over a billion dollars and assets of just under 500 million euros in September 2018. UHT operates a diversified mix of 69 properties in 20 states. They invest more specifically in medical office buildings, acute care hospitals, rehabilitation centers, sub-acute care facilities, autonomous emergency centers and child care centers. UHT has a tremendous growth opportunity over the next few decades as the need for healthcare facilities continues to grow and UHT is able to acquire new properties. As properties are acquired, UHT will be able to grow and deliver even larger distributions to customers. With 30 states and countless major cities to expand to, we believe that the potential of UHTs is virtually limitless.

Source: UHT

Why we think that the UHT is financially strong

REITs, like Universal Health Realty Income Trust, do not often use traditional indicators such as price / earnings ratio or price / sales ratio as other companies do. Investors in REITs seek funds from adjusted activities or funds from operations to determine whether the Company is paying sustainable dividend distributions. UHT has seen its working capital fluctuate over the last decade, although the trend is positive in the long run. This ensures that dividends will continue to grow even beyond the recently announced increase from $ 0.67 to $ 4.65 per share for the fourth quarter of 2018. Despite a bumpy trajectory, we have seen UHT shareholder's position jump from 141 million 2009 to more than 200 million in 2018 and, as equity increases, the value of the business also increases in the long run.

Source: Ycharts

UHT has a long history of dividend increases

UHT has just increased its dividend from $ 0.67 to $ 0.675 per share for the 4th quarter of 2018, as part of their long-term history of slow and steady increases. Funds from the operations of Universal Health Realty Income Trust have increased by more than 250% since 2008, while total dividends paid were only 14% over the same period and total liabilities increased by 221%. In our view, increasing the company's cash outflows through dividends and interest payments at a slower rate than the funds available to the company from funds raised from operations is a a sign of prudence and financial soundness. We believe that UHT has proven that its dividend is sustainable and that it has growth opportunities as it builds its portfolio.

Source: Ycharts

Conclusion

UHT is financially sound to us and we consider it to be of high quality, particularly in the small real estate investment trust segment. That being said, UHT is speculative as it is a small operator that has neither the scale nor the asset base to compete with the large operators. As a result, we could see UHT becoming much more vulnerable to unique property issues that greatly affect their bottom line. It is because of these potential risks that we consider the UHT as speculative. However, in the long run, if UHT continues to operate with the same degree of quality, it can become a larger REIT or potentially acquired.

Disclosure: I / we have / we have no position in the actions mentioned, and we do not intend to initiate a position within the next 72 hours. I have written this article myself and it expresses my own opinions. I do not receive compensation for this (other than Seeking Alpha). I do not have any business relationship with a company whose actions are mentioned in this article.