Extendicare Inc (EXE.TO)

Have been trying to sell their US business, which has been troubled for some time. They have a buyer, but it is conditional on the resolution of some US investigation going on. If that goes well they should have a bunch of cash which should be fine. If it falls apart, the units will probably suffer.

Chart is indicating a bit of a basing pattern in 2013, which he likes. Historically, the stock has been held for its dividend. He would put a stop in at around $6 and examine to see if you feel the 6.8% yield can be sustained.

Sold her holdings earlier this year. They are actually quite good operators but looking at the US healthcare market, there are a lot of challenges. Feels the environments they are facing in the US are quite challenging.

(Market Call Minute.) Has a reimbursement issue in the US.

Stock has somewhat of a checkered past. Got into the US some time ago, which turned out to be an absolute disaster. They are still being sued an this has been a black cloud over them. (US is very litigious.) Canadian operations are quite good but feels the dividend could be at risk.

(Market Call Minute) Ontario properties. They have issues with the US properties. They are trying to get out of the US.

Has had 1 or 2 missteps and is not a sector that a lot of the income fund managers like simply because it is such an operational business. Dependent on provincial governments. Lots of things out of their control.

There is a growing need. The concern is can you offer these places at a profit. As they offer more nursing, the government will become more in more involved, and have more regulations, with more staff onsite, and more trained staff. Doesn't own anything in this sector at the moment. He is waiting to see.

Just cut their dividend. Are going to split up the business into US and Canadian. He views that it's worth $7.50, but don't chase it below 7.

Had 52 week high and then low on the same day when dividend was cut. A prudent measure to shore up balance sheet. The space is still under a great deal of pressure. It will continue for 3-5 years. Prefers Canadian focused companies like CSH-T.

Just sold her holdings. Just announced a distribution cut. Really good operators and do a really good job but unfortunately, in an industry where they are facing a lot of headwinds, particularly in the US where they are facing cuts in Medicare and Medicaid. Wouldn’t be in a real rush to Sell your position, but from a longer-term standpoint, your better off to roll into something else that is a little more stable.

A few years ago this was a market favourite. They were expanding into the US but that turned into a mitigated disaster. Got rid of a lot of the US assets but are still unwinding some and still facing some lawsuits. Payout ratio is quite high so you have to question whether the 11% yield is sustainable.

Seniors housing in Canada and skilled nursing facilities in the US and have run into trouble, primarily in the US, in having their funding cut. Had a lot of litigation problems, mostly in Kentucky, which they exited. Also, had a period where the number of people going through their facilities were going down. This has been rebuilding over the last few quarters until the last one when their provisions for litigation went up again and their census went down again. There is a lot of pressure on the stock and will continue to be. Doesn’t feel there is any immediate pressure on cutting the dividend.

His biggest concern with this is regulatory risks. Feels the 10.2% dividend is sustainable based on today’s regulatory reimbursement rates, but is uncertain about what they are going to look like next year. A couple of years ago there was a 12% cut. Saw a low single-digit increase this year. There could be a decrease or increase next year. He is particularly concerned with what is going on in the US regarding a fiscal cliff. US has some budget issues.

Have skilled nursing facilities in the US as well as long-term care homes in Canada. Thinks the dividend is sustainable at the moment. Have about a 75% payout ratio with a yield of about 10% which should make you worry. Face a lot of headline risks because their biggest payers are Medicare and Medicaid. Got a 1.9% raise this fall but if there is no agreement in Congress, they’ll lose 2%. On the positive side they have good demographics working for them.