by Ian Wyatt, editor $100K Portfolio
For investors who want to earn income from real estate without having to become a landlord, the REIT is the perfect vehicle.
In the health care industry, there is no better "landlord" than Health Care REIT
), which was founded in 1970 and now owns $14.3 billion in real estate investments consisting of 937 properties.
In April, the company made a $2.4 billion acquisition of Genesis
HealthCare. It wasn't HCN's first acquisition. In 2011, management
completed $5.6 billion in purchases, centered largely on senior living
and skilled nursing complexes.
Year to date, management has already plunked $3 billion in acquisitions and shows no signs of slowing down.
the constant growth in size, the real estate portfolio is balanced. HCN
holdings span 46 states and its segments are divided among various
health care facilities. Its portfolio includes 42% senior living, 32%
skilled nursing, 9% office buildings, and 4% hospitals.
benefit from an aging American population, as baby boomers move into
retirement and begin requiring additional health care services.
Specifically, HCN's assisted senior living centers are a combination of
housing and personalized support services designed for those who need
help with the activities of daily living.
And the skilled
nursing complexes provide inpatient skilled nursing and care services as
well as rehabilitative and transitional medical services. Both types of
facilities are likely to be in high demand in the coming decades.
does not provide medical services directly to patients, nor does it
operate these facilities. Instead, the company simply provides the
facilities to the medical providers, signing long-term leases for the
For this reason the company is a bit more insulated
from any future cuts to medical reimbursements by insurance companies or
Since 2008, the company's sales have nearly
tripled. And in the last year alone, revenues more than doubled to $1.4
billion. While much of that growth was courtesy of the company's many
acquisitions, it appears that HCN purchased these properties under good
terms. These deals should benefit shareholders for years to come.
the business has grown at a healthy clip over the past several years
and long-term lease contracts should continue to produce consistent
HCN shrewdly invests in facilities managed by
experienced operators. Management carefully structured a large number of
their leased properties under master lease terms.
By using a
master lease, HCN can cover several properties under the same contract
with a term of between 12 and 15 years. Many of these contracts have a
15-year renewal option.
Though lengthy lease agreements can lead
to consistent financial results, they also helps management build
accurate long-term forecasts. Such clarity is important when making
acquisition plans or dividend decisions.
In addition to investing
cash flow in new properties, HCN has been very shareholder friendly.
Management has provided shareholders with a generous cash dividend. And
with the exception of a momentary blip five years ago, the dividend has
been climbing steadily since 1997.
Looking forward, I expect
management will continue to be generous with its dividend program. HCN
is currently paying a dividend of $2.96 per share, providing investors
with a 5% yield.
The combination of its REIT structure, exposure
to a positive long-term industry trend and a consistent dividend makes
HCN a great income investment to hold for the long-term.