The Right REITs for Healthy Returns

11/24/2014 8:00 am EST

Focus: REITS

Genia Turanova

Editor, Leeb Income Performance

Healthcare reform and demographic trends both overlap in two of our real estate investment trust recommendations, explains Genia Turanova, editor of Leeb Income Performance.

Founded in 1970, Health Care REIT (HCN) has 1,224 properties located in the US, UK, and Canada.

It owns facilities that provide essential medical care, such as senior living communities, medical office buildings, inpatient and outpatient medical centers, and science facilities.

During the past few years, it has increased its gross real estate investments from $6.5 billion in 2008 to $27.2 billion at the end of the second quarter of 2014.

Internally, HCN has been able to increase its cash flow and earnings by developing its properties and capitalizing on its table, triple-net leased investments, combined with the higher growth potential for senior housing operations and life science investments.

HCP (HCP) is another fully integrated REIT in the healthcare space and the only REIT within the S&P 500 Dividend Aristocrats index, after 29 consecutive years of dividend increases.

With the US population aged 75 and older expected to grow 5.4 times faster than the overall national population, the market is large and the demand for services provided by these two REITs should remain strong.

Moreover, the REIT structure is beneficial for both companies as it allows them to tap into the growing and consolidating market, and for investors, who benefit from the total return potential of both REITs. We continue to view both HCP and Health Care REIT as buys.

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