Consider These High-Yield Healthcare REITs Heading into the New Year

Healthcare real estate investment trusts (REITs) invest in a variety of property types such as assisted living, hospitals, and surgery centers. The operators in these properties are providing services that won’t be going away. This makes healthcare REITs one of the most attractive for long-term growth.

Investing in a hospital REIT or nursing home REITs could add stability to a portfolio over the long term.  Because real estate is an asset class that’s not directly tied to traditional markets, REITs can bolster your portfolio when markets take a plunge.

“Health care REITs provide investors with a useful diversification tool with a robust long-term performance that will typically reduce the volatility of a portfolio because of how much returns differ from those of the S&P 500,” says Andrew Latham, managing editor of SuperMoney.

If you are one of the many investors looking to diversify your portfolio through REIT investing look no further.  Our team has compiled this list of some of the most attractive healthcare REITs available.  

Medical Properties Trust (MPW)  is a healthcare REIT that invests in hospitals; it owns 385 hospital properties representing 42,000 licensed beds across nine countries.  Medical Properties Trust leases facilities to 46 hospital systems and ranks as the second largest owner of hospital beds in the U.S. Hospital systems enter into sale-leaseback arrangements with the REIT to monetize real estate assets and reduce operating costs.

MPW has delivered 30% annual asset growth and 8% annual FFO per share gains over the past decade. That has helped a short string of seven consecutive years of dividend increases, with growth averaging a modest 4% annually.

During the first nine months of 2021, Medical Properties Trust grew FFO per share by 15% and closed $3.1 billion of acquisitions, with more deals scheduled to close in 2022 as the REIT capitalizes on acquisition opportunities created by the pandemic. 

“Management’s strong capital allocation acumen, along with deep operator relationships, should generate strong earnings, NAV, and dividend growth for shareholders for the foreseeable future,” contends Raymond James analyst Jonathan Hughes who recently initiated coverage of Medical Properties Trust with a Strong Buy rating and $25 price target.

Healthcare REIT Healthpeak Properties (PEAK) owns 633 properties, balanced across the life sciences, senior housing and medical office sectors. The life sciences portfolio consists of lab and office space focusing on three leading medical research markets (San Francisco, San Diego and Boston), with properties typically located in business park or campus settings. Medical office properties are located adjacent to hospitals and leased to hospitals or physician groups.

The company has better-than-average liquidity to ride out any further COVID-related disruptions.  Total liquidity is $2.6 billion, including $2.4 billion available on its $2.5 billion revolving credit facility, as well as $150 million in cash and cash equivalents and no material debt maturities before 2023.

Longer-term, this high-yield REIT should benefit from demographic trends that include aging baby boomers demanding new treatments and medical devices, increased outpatient services and more seniors requiring daily living assistance. In addition, the company boasts a $1.2 billion development pipeline that is already 63% pre-leased.

Healthpeak was previously known as Healthcare REIT and cut its dividend in 2017 after spinning off its nursing home business, marking the REIT’s only dividend cut in 25 years. Since then, the company has paid a steady $1.48 annual dividend, keeping the payout ratio at  a safe sub-80% average over the past four years.

National Health Investors (NHI) invests in retirement communities, skilled nursing facilities, medical office buildings and specialty hospitals. Its portfolio encompasses 243 properties leased to 37 operators and spread across 34 states.

NHI has outperformed healthcare REIT peers over the past six years, generating roughly 5% annual FFO per share growth and 6% dividend growth while maintaining modest payout at less than 80% of earnings.

One reason this REIT is great for retirees is its fortress-like balance sheet.  NHI has very low leverage (4.8 times ratio of debt-to-adjusted EBITDA), $785 million of liquidity and no significant debt maturities before 2023.

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