Health Care REITs Offer Income for Dividend-Starved Investors

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

There are very few issues that Democrats, Republicans, Independents and Libertarians agree on these days, and of the most divisive is the role of health care in America and what form or forms it should take.

Government-run versus privately operated or some combination of both has all sides waging a war of rhetoric to shape the narrative as we head into an election year. The stakes are huge for all involved, but one thing we know for sure is that spending on health care across America will rise about 6% in 2020, as forecast by the Congressional Budget Office (CBO), mostly due to rising drug prices.

At the same time one sub-sector of health care that stands to greatly benefit from more people living much longer is the health care facilities operators. More people require more space to diagnose, hospitalize, treat, rehabilitate and live with assistance on a long-term basis.

The conventional thinking is that a major portion of the Affordable Care Act (ACA) will survive and the industry will see sustained growth in enrollment numbers going forward. The Affordable Care Act program may amount to $1.7 trillion over a decade, according to a CBO projection and that has caused a tidal wave of fresh interest on how to cash in on this new tsunami of government spending.

The spending spree comes at a time when the demographic data support getting long in some of the health care real estate investment trusts (REITs) where investors can collect a nice dividend yield and some capital gains to not just amass wealth but also offer a hedge against rising health care costs. In my Cash Machine high-yield advisory service, we’re looking to go long in energy master limited partnerships (MLPs) to offset higher gas prices and utility stocks to hedge against rising utility bills. So why not own some income-generating health care assets? I believe investors should.

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Health Care REITs Offer Income and a Hedge Against Rising Patient Costs

It just makes sense to up our exposure in the health care sector at this time. The industry is still fairly fragmented with many opportunities for attractive income and growth. From a fundamental standpoint, baby boomers, a group that constitutes a little more than a quarter of the U.S. population, are retiring in droves. Estimates are that 10,000 boomers turn 65 each day, a phenomenon that won’t end until sometime in 2030.

This is good news for companies that specialize in elderly care, a sector that includes real estate. REITS that own hospitals, long-term care facilities, assisted living housing, rehabilitation centers, ambulatory centers, nursing homes and senior communities are going to flourish during the next 10 years under any form of health care legislation.

The inertia is just too broad and powerful to prevent success from happening for the most savvy of acquirers of properties. Welltower Inc. (WELL), Ventas (VTR) and HCP Inc. (HCP) are the three largest health care REITs by a wide margin and all three have been on a buying spree the past couple of years. The big are getting bigger and are paying out some juicy dividend yields in the process.

Health Care REITs Offer Income for Investors

Welltower yields 4.16%, Ventas is even higher at 4.51% and HCP pays out 4.53%. When looking at some of the smaller health care REITs, dividend yields can be even larger. One that sticks out on my radar is Omega Healthcare Investors (OHI), which sports a dividend yield of 6.94%. And then there is a specialty health care REIT that I recommend to my Cash Machine subscribers that pays 7.10% and has appreciated 27% in 2019 alone.

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What’s especially nice about the group and those I’m looking to add is that the respective charts of each show a strong up-and-to-the-right pattern that is giving income investors a fantastic ride for their money and paying the doctor bills along the way. Take a tour of Cash Machine by clicking here and bring some healthy income solutions to your portfolio.

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