This morning, stocks inched higher after another record-breaking session where the Dow and S&P 500 closed at new records. With only two trading days left in 2021, the major indices are on track for a green December and a positive end to a strong year.
Moving into 2022, many investors are re-accessing their portfolios to shore their 2021 gains. 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.
Today we’ll discuss a healthcare REIT that has maintained strength through the worst of the pandemic and is looking toward expansion which could mean significant rewards for investors in the years to come.
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 a business park or campus settings. Medical office properties are located adjacent to hospitals and leased to hospitals or physician groups.
Income from senior housing properties declined in 2021 due to pandemic effects but was offset by strength in the life sciences and medical office portfolios, which grew income 5.7% and 2.3%, respectively.
The company has better-than-average liquidity to ride out 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 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. The payout ratio rose to about 90% in 2020 because of COVID, but it has averaged a safe sub-80% over the past four years. The current 82% payout ratio is comfortable enough to suggest that PEAK’s 3.32% dividend yield isn’t going anywhere anytime soon.
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