Diversification is the name of the game in investments; no point in putting all your eggs in one basket, and once the economic crisis hits, your portfolio takes a hit. Healthcare REITs are also one way of ensuring that you have a steady income source, especially if you are looking to live your sunset years without a financial burden. However, caution has always been advised even in REITs, and the rule of thumb usually is that REITs should not comprise more than 25% of your portfolio. That being said, it is crucial to choose wisely which stocks to invest in since they also are quite volatile. Here are five healthcare REITS we think you should consider.
You might reason that this is the worst stock you would want to buy because you heard your parents threatening to cut you out of their will if you ever place them in a senior home. While seniors have their reasons for disliking senior housing, Welltower Inc. provides more than just a living space; it is a wholesome experience offering even advanced medical care. For this reason, it has weathered every financial and economic crisis since its founding in 1970.
Welltower Inc. was the first healthcare REIT and its diversification makes it the right investment choice. The Motley Fool agrees that it is a good buy, although the COVID-19 pandemic is hitting it hard. Still, that has been almost every business’s experience. If you are planning for long term investment, you might wait for the price to drop as is predicted, then once the growth curve starts going upwards, so will the share price, and you might make a killing from your stock.
In March 2020, Ventas shareholders regretted the investment they made because the share price had fallen 34%. In 2019, it had also not done well with the decline of 27%. Therefore, it is no wonder that Kiplinger listed it among the worst stocks to buy in 2020. The article explained that there are no growth prospects for 2020 for Ventas shares. However, before you dismiss it in agreement, there is life beyond 2020, and Ventas should be top of your list if you are interested in a long term investment.
Kiplinger still mentioned it as the top 5 stocks to buy and hold for decades because their value will grow. Ventas is similar to Welltower Inc. in most ways, such as investing in senior housing but what sets it apart is that it also has invested in medical research. We all know that clinical trials can break or make a company, and Ventas is a sure bet. Besides, you will want to invest in a company that is also diversified to cushion you during hard times. The best thing about being a Ventas shareholder is that you will enjoy the ever-rising dividend payments, which is mainly what investors hope to get from their investments.
Omega Healthcare invests mainly in nursing and assisted living facilities, and the asset portfolio is operated through a triple net lease structure. A triple net lease means that the tenant agrees to pay all expenses arising from the property use, including insurance, taxes, and maintenance. Of course, with such an agreement, the company can maximize its profits since they are not dipping into their pockets. Therefore, it is no surprise that the company raised its dividend in 2019 to $2.68 per share. It was expected that the REIT would increase the dividend payout to about $3.20 in 2020, much to the shareholders’ joy.
That commitment to putting the interests of its shareholders should be a motivation to buy, but for now, you will have to wait until the COVID-19 pandemic has passed. According to Business Wire, in March 2020, it authorized a stock repurchase of up to $200 million of the outstanding common stock that will take place for the next 12 months. Further, there was a suspension of the dividend reinvestment and stock purchase plan. Besides, Omega Healthcare’s portfolio is very diverse that even when some states cut off Medicaid programs, there was no threat to the company’s growth. That kind of stability is what any investor seeks.
Healthcare Trust of America (HTA)
According to MarketBeat, for the past 180 days, the Wall Street analysts have reached a consensus that HTA stock is a good buy. The share price has not been declining at an alarming rate, having reached a high of $32.36 in March 2020, and currently, it stands at $26.08. For the past three years, the dividend payout has remained the same, but that is the company’s tradition. The good thing is that it has never failed to pay its shareholders dividends, nor has it ever decreased the payout.
The principal investment in its portfolio is medical office buildings, and it has become the largest dedicated operator and owner of medical office buildings in the US. The company dates back to 2006 and went public in 2012 and boasts outperforming REITs and S&P 500 indices. Maybe it is the steady performance and growth that make analysts classify it as a worthy investment.
Medical Properties Trust
While other businesses are trying to survive through the economic crisis Seeking Alpha describes Medical Properties Trust as a stable play in an unstable market. This REIT is the second-largest private owner of government hospital beds in the US, and given the current medical crisis arising from the pandemic, it must be reaping big. No wonder the dividend yield has been estimated at 5.9%, and it will increase, allowing investors to enjoy remarkable returns for their investment. Hospital operators were recipients of $100 billion from the stimulus package. With a REIT backed by the government, you are assured of stability and that your money will be in good hands.