Ventas Unveils Equity Offering

Ventas Inc. (VTR - Analyst Report) recently disclosed that it has established an “at-the-market” equity offering program. Under the program, the company has the option to sell up to a total of $750 million of its common stock.

Ventas plans to utilize the proceeds generated from the stock sale for general corporate purposes, including financing for acquisitions and investments as well as for debt payment.

From time to time, Ventas may offer and sell shares through BofA Merrill Lynch, Barclays, Citigroup Inc. (C - Analyst Report), Goldman, Sachs & Co. (GS - Analyst Report), JPMorgan Chase & Co. (JPM - Analyst Report) and RBC Capital Markets, as sales agents.

For Ventas, though the stock offering would result in share dilution, financing for strategic acquisitions and investments would help augment its top line while paying back of debt would reduce its interest expenses.

Moreover, only last month, Ventas reported better-than-expected fourth quarter 2012 results and announced an 8% hike in its quarterly dividend rate to 67 cents per share for the first quarter 2013. Its normalized funds from operations (FFO) reached 99 cents per share in the fourth quarter, 2 cents ahead of the Zacks Consensus Estimate and 10 cents above the prior-year quarter figure.

This was encouraging and we expect the company’s strategic move in Atria and other opportunistic acquisitions to provide significant upside potential to the stock going forward. Moreover, being one of the largest healthcare REITs in the U.S., Ventas boasts a significantly diversified portfolio and exposure to nearly all types of facilities.

Also, the healthcare sector is relatively immune to the downturn in the economy, and provides a steady source of income that insulates the company from short-term market volatility.

Ventas currently has a Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.