This REIT got slaughtered today. Anyone in SNH?

Question

SNH dropped 20% today.  https://finance.yahoo.com/quote/SNH?p=SNH&.tsrc=fin-srch-v1

Oh the importance of buy limits.  I've had my eye on this Senior Housing REIT for a little while.  The dividend yield was 11%!

I was thinking SNH would be perfect for an IRA purchase.  11% COC min and no tenants?  Sign me up!

I set a buy limit (GTC here vs for the day) like I always do, just above the 52-week low of $11.17 and carried on. What could be a better play in an aging US than Senior Housing?

Imagine my surprise to see that it opened today at $9.50, down 22%!  Anyone else have this REIT?  They are restructuring and slashing their dividend from $1.58/share to $.55 to $.65.  Bad management is killing this company, but they appear to be taking the drastic steps necessary to save it and have maintaining shareholder value front of mind.

My buy limit order filled this morning at $9.61.  Currently trading around $9.75.   I will probably execute a Trailing Stop Loss at 3% to hopefully catch the upside of the day but limit the down.   I get free trades, so no transaction costs.  It's also in an IRA so no tax gobbledy-gook.

Anyone else in SNH or have an opinion about it?  Vet your REITS like you would any investment purchase!

Frank Wong · Answer

Yes, please update I am curious how things play out. I've tried to catch falling knives sometimes it works sometimes you get sliced. haha.  I know enough about equities that it's always a learning process and to always remain humble, if not the market will humble you.  There are some amazing REITS out there and I have always thought that it would be a much better investment than crowdfunding.

The one benefit you have with Reits is your exit.  If you needed the money or just wanted to get out you can.  Something about cashing out in seconds is priceless.  I think crowdfunding just sounds sexier and people want the hot thing for the moment but Reits are proven companies with proven management. To me, it seems like a safer bet.

Roy Muller · Answer

@Steve Vaughan I am now. Thanks for bringing it up.

Paul Allen · Answer

Geez, I hope the recommendation when it was at $18 was to short it!

Since REIT dividends now get preferential tax treatment under Section 199A, are you trading REITs within your IRA as a tax hedge against capital gains?

Interesting thread. I'm a buy-and-holder, but I still enjoy a good trading discussion every now and then. Thanks for posting. Best of Luck with SNH!

Frank Wong · Answer

@Steve Vaughan

Cool look into your thinking on this, not my space so I have no input.  I don't trade anything other than SPY and Emini.  I know so boring. Lol. I think the key component here that every investor need to apply is a stop or trailing stop.  If you are not using stops in your trading its not "IF" your account will get blown up it's "WHEN".  Manage your risk.

Peter Sanchez · Answer

Sometimes dividend cuts are fine.  A REIT I own (SRG) did a dividend cut to preserve cash to fund very profitable projects. Because it was cutting for a good reason (vs we're cutting the dividend because business is down) the stock price hardly budged.

And the high dividend can be a double edged sword.  Look at WPG, which is yielding almost 18%.  But it's a REIT that owns malls in 2 tier cities like Columbus Ohio and Peoria Illinois.  The CEO is a sharp guy and owns a lot of stock that he purchased with his own money, but he's in a tough industry and the reason that the yield is so high on a lot of these is that they are ugly and have some hair on them.  You have to look past that and try to see the inner beauty.

Steve Vaughan · Answer

Completely agree crowd funding has a lot of additonal risk, especially given the limited upside. This volatile REIT is not the norm in that space.  I'd rather take a liquid position with a proven and tradeable public REIT any day.

Steve Vaughan · Answer

Unfortunately, the recommendation wasn't to short it at $18.  Tells you what a financial blogger knows, right? LOL  He was just excited about the senior housing and medical space and the 8% (at the time) dividend.

I generally keep dividend payers, MLPs and leveraged ETFs n IRAs.  Growth stocks and MFs in cash accts.  Even with preferential tax treatment, it's still another Div I don't want to have to keep track of.  Hassle factor.  Thanks for stopping by, Paul!

Steve Vaughan · Answer

Thanks, Frank. I know you know a lot about equities and trading, so glad you chimed in.

REITs are kind of an older person play I think.  I didn't get interested in them at all until a few years ago.  The dividends and liquidity are attractive.  I only dabble inside IRAs.  Syndication of an existing  (hopefully) stabilized hold of you will.

I heard about this one from one of the financial bloggers on a podcast that reads them to you called Optimal Finance Daily. SNH was recommended back when it traded at like $18. I first watched it fall to about $12 and put in that make me buy limit order of a little over $11 a couple weeks ago.

After starting this I put a couple hundred shares on a sell limit at $9.92 (trailing sell stop isn't an option on Vanguard) and it executed. SNH closed at $10.12.  I'm ok with that after seeing many a falling knife open another 20% lower day 2.  You have, too, I'm sure. Only time will tell if I should've pulled all chips or not.  Will update if outcome is interesting.

This REIT got slaughtered today. Anyone in SNH?

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