Performance Review: 7 Healthcare REITs

|
 |  Includes: HCN, HCP, LTC, NHI, OHI, SNH, VTR
by: Zvi Bar

Many investors believe that healthcare-oriented investments should continue to grow as the nation and world ages, and medical advancements further improve life quality and longevity. Healthcare REITs provide investors with one method of investing in hospitals, rehabilitation facilities and senior health retirement centers.

Healthcare REIT exposure may also help increase a portfolio's yield, as many healthcare REITs offer yields well above the market's average. Beyond the income stream that their REIT business model generally necessitates, medical real estate is an interesting and highly focused industry that should differ from residential and most traditional commercial real estate, making it a potentially growing and low correlation real estate allocation.

Over the last several decades, medical costs have increased at a rate that has outpaced inflation, and if that were to continue into the future it can be expected that investments in such businesses may also outpace inflation. Being the landlord to medical services could be a beneficial position. Nonetheless, the current regulatory and insurance landscape does present highlighted concerns within the American healthcare industry, and potential risks to investors. Still, if a medical center shall survive, it will have to pay some landlord rent.

Below are recent performance numbers for seven publicly traded healthcare REITs: HCP, Inc. (NYSE:HCP), Health Care REIT Inc. (NYSE:HCN), LTC Properties Inc. (NYSE:LTC), National Health Investors, Inc. (NYSE:NHI), Omega Healthcare Investors, Inc. (NYSE:OHI), Senior Housing Properties Trust (NYSE:SNH) and Ventas, Inc. (NYSE:VTR). I have included their current dividend yields, as well as their 1-week, 2012-to-date and 6-month equity performance rates.Click to enlarge
So far within 2012, the average performance of these healthcare REITs is an increase of 2.82 percent, with an average annual yield of 5.76 percent.

The equity performance by the group has considerably underperformed the broader market as defined by the S&P 500 so far this year, which may at least partially be due to concerns that this election year may be volatile for the healthcare industry. Additionally, many investors may now be concerned that certain high yield investments, including these healthcare REITs, may decline if interest rates start to increase and/or spike higher.

Healthcare is often highly dependent upon the economy and general employment rates. Individuals with healthcare coverage are far more likely to regularly see doctors, and the unemployed, especially once COBRA insurance coverage ends, are often highly reluctant to see doctors unless an emergency presents itself. Any substantive development in healthcare insurance nationalization could have unforeseen positive or negative impacts upon this business, its volumes and profit margins.

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 intended to be informative and should not be construed as personalized advice as it does not take into account your specific situation or objectives.