One of my core positions in my income portfolio, Healthcare Trust of America (HTA), delivered its last quarterly results of FY2013 this morning. As usual the results were solid but nothing fancy. For yield investors looking for an over 5% yield with low volatility; this health care real estate investment trust (REIT) might be just the Rx called for.
Healthcare Trust of America is a real estate investment trust that focuses on medical office buildings and healthcare-related facilities. It has a well-diversified collection of healthcare properties in ~30 states with just over 13mm square feet of leasable space.
- Normalized FFO (Funds from Operations) increased over 6% Y/Y.
- The company made three acquisitions for just over $150mm in the quarter. This added 450,000 square feet of space that is 98% leased.
- Net income in properties owned over a year rose a steady 3%.
- Despite the acquisitions, Moody's upgraded the company's credit rating. The REIT has over $600mm of liquidity currently.
- For the year, HTA generated 2013 returns that exceeded the SNL US REIT Healthcare Index by approximately 1,100 basis points and the MSCI US REIT (RMS) Index by approximately 230 basis points.
- The REIT added some 1.5mm square feet of space for just under $400mm with an average leasing rate of 95%.
- Net income in properties owned over a year rose at least 3% Y/Y during all four fiscal quarters of 2013.
- HTA was added to the Russell Global and Russell 1000 Indexes in July.
- Total occupancy grew 50bps Y/Y to 91.6%. Look for new acquisitions to add to occupancy rate in 2014.
Dividend Yield & Growth Prospects:
The REIT yields over five percent (5.3%). I would look for the new acquisitions, increasing occupancy rates and improving NOI (Net Operating Income) to lead to a dividend hike in 2014. Revenue should grow in the 7% to 9% range in FY2014 and insiders remain small but frequent net buyers of the stock.
In addition, I continue to believe the company will benefit from the implementation of the Affordable Care Act, once it gets past its disastrous rollout. This government program will drive demand for more of the medical personal that Healthcare Trust provides accommodations for as more individuals are provided with insurance coverage.
Owning HTA can be as exciting as watching paint dry. However, it provides an over 5% yield, decent growth and low volatility. For yield investors HTA is a boring but solid addition to their income portfolios. ACCUMULATE