Recent Performance Review For 7 High-Yield Healthcare REITs

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

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

Healthcare REIT exposure can also help increase a portfolio's yield, as a great deal of the publicly traded healthcare REITs offer yields well above the market's average. Additionally, beyond the income stream that their REIT business model generally necessitates, medical real estate is a highly focused industry that differs from both residential and most traditional commercial real estate -- making it a potentially growing and low-correlation allocation.

For decades, medical costs have increased at a rate that has outpaced inflation. If the trend continues into the future, it can be expected that investments in such businesses might also outpace inflation. Being the landlord to such medical services may be a beneficial position. Of course, the current regulatory and insurance landscape does present concerns within the American healthcare industry, and potential risks to investors. Nonetheless, if a medical center does survive, it will have to pay its 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 one-month, 2012-to-date, and six-month equity performance rates.


So far in 2012, the average performance of these healthcare REITs is an increase of 5.11%, with an average annual yield of 5.73%.

The average equity performance by the group has underperformed the broader market as defined by the S&P 500 so far this year, but has outperformed the benchmark over the last month. This may be because many investors were concerned that certain high-yield investments, including these healthcare REITs, would decline if interest rates spiked higher. Nonetheless, since interest rates have again returned to historic lows and the markets have come under pressure, these high-yield healthcare REITs are again in favor.

Healthcare is often highly dependent upon the economy and general employment rates. Individuals with healthcare coverage are far more likely to see doctors regularly, and the unemployed -- especially once COBRA insurance coverage ends -- are often reluctant to see doctors unless an emergency presents itself.

Any substantive development in healthcare insurance nationalization is likely to have unforeseen positive or negative impacts upon this business, its volumes and profit margins. Investors should also understand that the U.S. Supreme Court is expected to release its opinion as to the constitutionality of President Obama's healthcare mandate and regulations within the next few months, and that the decision may have a volatile effect on the healthcare sector and the industries that service it -- including healthcare REITs.

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.