But that may be offering investors an opportunity. Here are three healthcare REITs worth looking at today.
1. The all-in-one
The healthcare REIT sector is actually pretty big, covering offices, medical research facilities, senior housing, hospitals, and nursing homes, among other sectors. For investors who just want to own one broadly diversified healthcare REIT and not a collection of focused names, Ventas (NYSE: VTR) is probably the best call.
The yield here is 3.2%. Its portfolio includes senior housing (about 45% of rents), medical office (23%), research (10%), and a collection of smaller exposures to hospitals, long-term care facilities, and other things. It’s kind of like a punt.
To be fair, it has a heavy exposure to senior housing operating assets (known as SHOP in the industry). That was a terrible business in 2020, and it continues to face headwinds because of the pandemic. However, Ventas is starting to see this business turn higher again, with improving leads and move-in trends in recent months.
The key here is that the REIT both owns and operates these assets (it actually hires others to handle the day-to-day activities), so the property-level performance flows through to Ventas’ top and bottom lines. That was a huge drag in 2020, but as business picks up again, it should turn into a notable tailwind. Now add in the aging baby boomers, and the long-term opportunity for senior housing looks pretty positive. And Ventas appears pretty well-positioned.
The dividend was cut in 2020, and conservative types might want to wait for dividend growth to resume before jumping in here. However, for investors looking for a simple way to play the aging demographic story that backs healthcare REITs more broadly, Ventas is a solid, diversified, and historically well-run option.
2. An incredible dividend record
Next up is Universal Health Realty Income Trust (NYSE: UHT), with a yield of 5%. This healthcare REIT’s claim to fame is that it has strung together more than three decades of annual dividend increases, which puts it soundly into the Dividend Aristocrat area. For investors who like dividend consistency, no healthcare REIT can match up to that record (in fact, there’s only one REIT that has a better dividend track record, Federal Realty).
Universal Health Realty’s dividend growth has historically been pretty slow, but that may be just fine for conservative investors. The focus of the portfolio is medical office builds and clinics, at 71% of its investments. Acute care hospitals come in at 16% of its investment, with the remainder a hodgepodge of other property types.
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