For the REIT sector, an improving economy typically means rising commercial property values and the ...
PowerTrend Boosts Physicians Realty
08/01/2014 7:00 am EST
Our latest featured recommendation is a 6.3%-dividend-yielding real estate investment trust that focuses on healthcare properties that are leased to physicians, hospitals, and healthcare delivery systems, notes Chris Versace, editor of PowerTrend Profits.
According to the US Department of Health and Human Services, healthcare spending reached $2.8 trillion in 2012, roughly 17.9% of US GDP. One of my key PowerTrends is “Living Longer Lives.”.
The general aging of the population, driven by the Baby Boomer generation, and advances in medical technology and services, which increase life expectancy, are key drivers of the growth in healthcare expenditures.
The continued increase in healthcare service demand will be offset by the increasingly complex and costly regulatory environment, changes in medical technology, and reductions in government reimbursements.
The net effect will pressure capital-constrained healthcare providers to find cost-effective solutions for their real estate needs, and that is where Physicians Realty Trust (DOC) comes into play.
The REIT focuses on medical office buildings, outpatient treatment and diagnostic facilities, physician group practice clinics, ambulatory surgery centers, specialty hospitals and treatment centers, and long-term care facilities.
Since the IPO just about a year ago, the company has closed more than $350 million in transactions. Its current portfolio occupancy is 94.1%, with a weighted average lease term of 9.88 years. Only 3.3% of the company’s leases roll through December 2015 with no material lease expirations prior to 2016.
Another reason why we want to own DOC shares include the fact that five insiders recently bought a total of 10,500 shares at an average price of $13.20.
The other reason to buy is the company’s dividend yield, which stands at a steep 6.3%. The company is expected to grow its earnings to $1.16 per share in 2015, up from $0.89 per share this year and $0.17 per share in 2013.
Remember, in order to maintain their tax-preferred REIT status, Physicians Realty will need to pay out at least 90% of its income to shareholders. As earnings climb, so too should the dividend stream—and subsequently the share price.
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