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Global Medical: The Right Prescription for REIT Investors
02/19/2019 5:00 am EST
At present, our model portfolio does not hold any high-yield pure plays in healthcare. So, I wanted to put to work a real estate investment trust (REIT) this month that has a good story and a great yield within this space, asserts Bryan Perry, growth and income specialist and editor of Cash Machine.
Global Medical REIT (GMRE) is primarily engaged in the acquisition of licensed, state-of-the-art, all-purpose health care facilities and then leases these facilities to leading clinical operators under the long-term triple-net lease structure. The company is taking full advantage of industry trends that are embedded for future growth.
Health care spending in the United States is expected to increase 5.8% per year over the next decade, according to the U.S. Department of Health and Human Services. In dollar terms, health care expenditures are projected to grow from $3.0 trillion in 2014 to $5.4 trillion by 2024 to represent 19.6% of gross domestic product (GDP) five years from now.
The 65+ age group is expected to double between 2015 and 2060 and the 85+ age group is expected to triple between 2015 and 2060. And changing health care trends are driving new REIT structures like Global Medical.
Outpatient procedures are rapidly on the rise as patients demand this option, technological advances make it possible and physician groups are breaking away from hospitals to form their own outpatient solutions.
Global Medical’s widely diversified portfolio of properties is composed substantially of off-campus Medical Office Buildings, Specialty Hospitals, Inpatient Rehabilitation Facilities and Ambulatory Surgery Centers. This acquisition strategy coincides with taking advantage of the aging population and the decentralization of health care.
The company operates 72 modern facilities with a 100% occupancy rate from 41 high-quality tenants that occupy 1.9 million square feet of space with an average of 10.4 years remaining on outstanding lease terms. No tenant contributes greater than 11% to annualized base rent.
The company is growing Funds From Operations (FFO) at a nice pace. For the third quarter of 2018, GMRE increased revenue to $13.1 million from $7.9 million in the comparable prior year period. FFO increased to $0.21 per share for the quarter compared to $0.14 per share in the third quarter of 2017.
The company declared a quarterly dividend of $0.20, representing an annualized rate of $0.80 per share that translates to a current dividend yield of 8.07%.
The company went public in mid-2016 at $10 and has traded in a range of $7-$10 during the initial growth phase and is now hitting stride with a pipeline of potential acquisitions that are in the wings. Let’s put this all-weather health care REIT to work for us and collect a juicy yield. Buy Global Medical REIT under $10.
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