Healthcare REIT Roundup and Recent Performance Comparison

by: Zvi Bar

Healthcare oriented investments are often believed likely to grow as the nation ages and medical advancements continue to improve life quality and longevity. Many investors also appreciate healthcare REITs as a way to invest in hospitals, short/long term rehabilitation facilities and senior health retirement centers. Trustees also often believe that REIT exposure is necessary to maintain a prudently allocated portfolio of assets, and to ensure that there is income sufficient to meet any current obligations.

I previously analyzed the dividend growth of five healthcare REITs with market valuations of at least $1 billion and have since added two others to create a group that I intend on following going forward. Those seven are:
  1. HCP, Inc. (NYSE:HCP): Yield 5.4%
  2. Health Care REIT Inc. (HCN): Yield 5.7%
  3. Medical Properties Trust Inc. (MPW): Yield 6.9%
  4. Nationwide Health Properties Inc. (NHP): Yield 4.8%
  5. Omega Healthcare Investors Inc. (OHI): Yield 7.9%
  6. Senior Housing Properties Trust (SNH): Yield 6.5%
  7. Ventas, Inc. (VTR): Yield 4.5%

These healthcare REITs are attractive for the dividend income stream that the REIT model usually necessitates, and also with individuals who want exposure to real estate as an asset class that might appreciate after any coming inflation. Medical real estate is an interesting and highly specific industry, with varying niche sub-industries such as those mentioned above, amongst others.

Recent Healthare REIT Returns

Beyond the yield, these REITs have also appreciated over the last two years, with each of the seven REITs appreciating between 31% and 85% (or half as much on an annual basis). The two year chart, below, provides each REIT's individual performance and also indicates that the group frequently traded within a fairly tight range.

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Over the last year, these REITs continued to trade withiin a reasonably close range of one another (approximately 20%) and the group performed below their 2-year average, returning between -1.07% and 17.46% with the same REITs achieving the highest (NYSE:MPW) and lowest (NYSE:OHI) returns for both time-frames.

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Within 2011, these healthcare REITs have also maintained their relative range, returning between -9.14% and 11.71%, with the group becoming more volatile and negative over the last 6 weeks.

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All seven of these REITs performed negatively thus far in June, along with the rest of the market.

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Healthcare can be highly dependent upon the economy and general employment rates. Individuals with healthcare coverage are far more likely to regularly see doctors. Any substantive development in socializing healthcare could also have unforeseen--positive or negative--impacts upon the industry. Certainly, the aging population and, specifically, the transitioning of baby-boomers into Medicare should increase the volume of healthcare provided as well as the need for new facilities.

Additionally, pease note that several of these healthcare REITs have a reasonably high level of short interest. Many are betting against real estate, and healthcare is believed to be especially sensitive to not only economic, but also political issues. Further, medical care is a frequent focus as to potential fraud. These short sellers are often clever, but many are also often late to exit. Whether these shorts are late leavers or early arrivers is certainly open for debate.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: This article is news and should not be construed as personalized advice as it does not take into account your specific situation or objectives.