REITs are viewed as bond surrogates. The value of bonds and similar income investments frequently de...
It Pays to Buy This Health-Care REIT
02/19/2013 11:00 am EST
This recession-resistant company has a crack management team, but the best part for yield seekers is its large and growing dividend, writes Mark Skousen of High-Income Alert.
Jeffrey Saut, chief economist for Raymond James, has said we are in a secular bull market, based on his reading of the Dow Theory. He says the Dow Transportation Index has confirmed a rise in the Dow industrials.
I agree. The stock market just keeps clicking higher. The S&P 500 hit a new five-year high last week. And we are taking full advantage with our high-income portfolio.
Our shares of Inland Real Estate (IRC), for instance, are up more than 15% since we got in two months ago. Our Inland March $7.50 calls have more than tripled. We’ve already taken partial profits here. But go ahead and sell the balance to lock in final gains here, since there are only a few weeks until expiration.
We also hit our stop in NuStar GP Holdings (NSH), the oil & gas firm, for solid gains of 17% in the stock and 566% in the call options. Not bad! Remember, when we stop out of a position, we sell the related options as soon as possible.
Where to invest your profits? I have a new recommendation for you: Healthcare Trust of America (HTA).
Headquartered in Scottsdale, Ariz., Healthcare Trust is a real estate investment trust that invests in medical office buildings and health care-related facilities. It has a portfolio with more than $2.6 billion worth of property that totals approximately 12.5 million square feet. HTA operates in 27 states, including key metropolitan areas such as Atlanta, Phoenix, Pittsburgh, Boston, Dallas and Houston.
Unlike many trusts, HTA doesn’t farm out property management responsibilities. HTA is a fully integrated, self-administered, self-managed REIT that oversees its own day-to-day operations. This structure keeps costs lower and net income higher.
Many investors are concerned about the state of the economy and the fragility of the recovery. But this health-care REIT is a steady, recession-resistant business. Its portfolio occupancy rate tops 91%.
And the trust is well managed. For the past few years, it has grown both organically and through acquisitions, taking advantage of downturns to pick up new properties on the cheap.
The trust earned approximately 60 cents a share in 2012, but I estimate those earnings will grow at least 10% this year. That growth means the quarterly dividend—offering a current yield of 5.3%—is secure and likely to grow in the weeks ahead. I also see good capital gains potential here.
So, pick up Healthcare Trust of America at market and place a protective stop at $9. If you prefer to play this one more aggressively, try the July $12.50 calls, which last traded at 35 cents.
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