Health Care REITs, an Attractive Pipeline for Dividends
"There are a lot of hospitals... the market is huge out there. There's about a half a trillion dollars of available hospital properties out there... the pipeline is huge and we think that 2013 will be another big growth year for us."
Hospitals are the focal point of the health care delivery system and that produces a more stable and predictable value proposition. As Edward Aldag, Jr. explained (on "Mad Money"):
"If you look at the history of this country we have a lot of presidents... it doesn't matter who the president is going to be. Hospitals are going to be there. Hospitals are at the top of the pyramid in the delivery system for this sector. We're going to have hospitals regardless of whether it's Romney or whether it's Obama. So we're in a very good position throughout the election and beyond."
Medical Properties Trust pays an attractive dividend yield of 7.05% -- the second highest dividend yield in the health care sector and also one of the highest dividend yields in the equity REIT sector.
Since 2004, MPT's dividend has been paid every quarter and the dividend has increased by 18.2% compounded annually since 2004. In addition, since the company's IPO, MPT has returned 53.5% (compared with the MSCI U.S. REIT Index of 42.2%) and the three-year return (to 2011) was 90% (compared with 73.9% for the MSCI U.S. REIT Index).
Omega Healthcare is the "big dog" of the health care dividend dynasty. The Maryland-based REIT has a market cap of $2.48 billion and its current dividend yield is 7.95%. As of the third quarter, the company owned or held mortgages on 460 skilled nursing facilities, distributed among 47 third-party operators, in 33 states.
Omega reported third quarter FFO available to common stockholders of $56.7 million, or 52 cents per share, compared to $44.5 million, or 43 cents per share, a year-ago. AFFO totaled $58.7 million, or 54 cents per share, up from $49.2 million, or 48 cents per share, a year ago. The company also raised its full-year guidance in its earnings report.
Omega has maintained and increased its dividend yield for more than 10 years and the year-to-date total return is 23.42%.
Ventas, an S&P 500 company, is one of the leading health care REITs today and also the largest owner of senior housing and health care assets.
Its diverse portfolio of more than 1,400 assets in 47 states (including the District of Columbia) and two Canadian provinces consists of seniors housing communities, skilled nursing facilities, hospitals, medical office buildings and other properties.
At quarter end, Ventas has a fortuitous balance sheet with around $1.6 billion in available liquidity.
Ventas's strength in liquidity should allow the company to take advantage of opportunities and be a safe haven for investors in a disrupted market.