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Lisa Springer of StreetAuthority.com looks at Real Estate trusts that can provide consistently strong yields over the next 50 years. Her argument is that health care properties are going to be full with aging boomers and this will continue into the foreseeable future with an estimated 3.6 million potential retirees every year for the next 17 years.

To identify the best health care REITs, Lisa ran a screen for companies with positive five-year earnings and dividend growth, less debt than equity and a current dividend yield higher than 5%. These metrics establish some level of safety and a good starting point for narrowing down the field.

She came up with three health care REITS

1. Senior Housing Properties Trust (SNH) Yield: 7%

2. National Health Investors (NHI) Yield: 5%

3. LTC Properties (LTC) Yield: 6%

Lisa's top pick is Senior Housing because of its generous dividend and comparatively low exposure to Medicare/Medicaid cuts, but both National Health and LTC also offer exceptional dividend safety and good growth.

This is a very interesting set of selections and having a REIT choice is a great idea. I want to make a comparison of these stocks with two diversified REITS -- one domestic (VNQ) and one international (RWX). This will help us compare the returns of the sector against a more broader perspective.

Portfolio Performance Comparison

Portfolio/Fund Name YTD
Return
1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe
NHI 10% 11% 38% 25% 84% 15% 38%
LTC 1% 16% 81% 5% 11% 12% 25%
SNH -2% -2% -7% 16% 46% 4% 6%
VNQ 11% 11% 49% 34% 115% -0% -2%
RWX 16% -3% -4% 22% 94% -8% -25%

The first thing I note is that the medical sector returns did not suffer nearly as much over the past five years when real estate prices were under pressure. Student and retiree real estate is about as recession proof as you can get. Once you are outside of the real estate meltdown, VNQ gives the medical REITs a run for their money.

Five Year Chart

Lisa's top pick was SNH. As I look at the numbers, I would go for NHI or LTC first. I was surprised by how well health care REITs performed against the ETFs and that is worth some consideration.

More details...

Disclaimer: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.

Source: 3 High-Yield Stocks For The Coming Wave Of Retirees