Personal Finance

The Fourth Quarter Could Get Interesting for HCP Shareholders

Hcp Spinoff Hires
Hcp Spinoff Hires

Image source: HCP spin-off investor presentation

Theoretically, this improved quality will result in a lower cost of capital, and therefore more potential for growth through acquisitions at attractive spreads.

The spun-off QCP will also be set up for success, with a management team focused solely on maximizing the value of the post-acute/skilled nursing properties. HCP has stated that QCP will be able to use value-maximizing strategies that are either impractical or unavailable while the properties are still under the umbrella of HCP. QCP will be one of the largest REITs focused on its property type in the United States.

What to expect post-spinoff

The spinoff is likely to create some volatility in the short-term as the dust settles and the two new companies get used to operating independently. There's also the question of HCP's dividend, which has been raised every year for more than a quarter-century. You can bet that shareholders will be paying close attention to both REITs' dividend policies through this process.

However, the long-term potential created by the spinoff definitely outweighs the short-term volatility investors can expect. I don't think it will be long after the split before HCP becomes a rock-solid dividend powerhouse again, and if the HCR ManorCare assets actually start generating a significant profit, there is some serious upside potential from QCP. In the meantime, hold on tight -- it might be a bumpy ride in the fourth quarter.

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Matthew Frankel owns shares of HCP. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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