Recent Performance Review For 7 High-Yield Healthcare REITs

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

Many U.S. equity investors anticipate that healthcare-oriented investments are likely to appreciate as the nation ages, and as medical advancements continue to improve life quality and longevity. Healthcare REITs may provide investors with a method of investing in the hospitals, rehabilitation facilities, and senior health retirement centers that will service the nation's healthcare needs.

For several 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.

Healthcare REIT exposure should also help increase the average portfolio's yield. Several of the largest publicly traded healthcare REITs offer yields well above the market's average. Additionally, beyond the income stream that the REIT business requires, 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 asset allocation.

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.

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So far in 2012, the average performance of these healthcare REITs is an increase of 4.17 percent, with an average annual yield of 5.87%.

The average equity performance by the group has underperformed the broader market as defined by the S&P 500 (NYSEARCA:SPY) so far this year by about one percent, but these healthcare REITs outperformed the benchmark over the last month and three months, through the recent decline. Over the last three months, these REITs average 3.22 percent appreciation, while the S&P 500 has declined about 1.97 percent. Additionally, these healthcare REITs have an average yield of 5.87 percent, which is about three times the benchmark's yield.

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 are often reluctant to see doctors unless an emergency presents itself, especially once COBRA insurance coverage ends.

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 broader regulations within the next few weeks, and that this decision may have a volatile effect on the healthcare sector.

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.