If there was ever an awesome and timely combination in a growth and income investment, it is the health care real estate investment trust (REIT). They combine the health care sector in almost its most conservative silo, with high REIT distributions that get a very favorable treatment from the tax man. A new research report from the analysts at RBC points out that some of the top companies in the sector not only surpassed their earnings estimates, but the overall consensus estimate as well.
The RBC research points out that the health care REIT sector delivered solid stock performance toward the end of 2014, finishing the year with a total return of 33.2% and outperforming the SNL US REIT index by 5.5%. The total return is a measurement of capital appreciation and distributions paid. We like to remind readers that REIT distributions can contain depreciation and other expenses, which are considered a nontaxable return of capital.
Here are the four high-yielding health care REITs rated Overweight at RBC now.
Health Care REIT Inc. (NYSE: HCN) recently had a very well-received $1.5 billion offering. The company intends to use the net proceeds from the offering to repay advances under its primary unsecured credit facility and for general corporate purposes, including investing in health care and seniors housing properties. Health Care REIT is an S&P 500 company that invests across the full spectrum of seniors housing and health care real estate. It also provides an extensive array of property management and development services. As of the end of 2014, the company’s broadly diversified portfolio consisted of 1,328 properties in 46 states, the United Kingdom and Canada.
Health Care REIT investors are paid a very solid 4.3% distribution. The RBC price target for the stock is $80. The Thomson/First Call consensus estimate is $79.97. Shares closed Monday at $77.38.
LTC Properties Inc. (NYSE: LTC) primarily invests in senior housing and health care properties through triple-net lease transactions, mortgage loans and other investments. The company’s portfolio consists of 89 skilled nursing properties, 102 assisted living properties, 14 other senior housing properties, two schools and a parcel of land under development.
Investors here are paid a very nice 4.6% distribution. The RBC price objective is $47, and the consensus target is $44.67. Shares ended the trading day Monday at $44.88.
Sabra Healthcare REIT Inc. (NASDAQ: SBRA) owns and invests in real estate properties for the health care industry. Its property portfolio consists of 86 properties, comprising 67 skilled nursing facilities; 10 combined skilled nursing, assisted living and independent living facilities; five assisted living facilities; two mental health facilities; one independent living facility; and a continuing care retirement community. The company leases its properties to subsidiaries of Sun Healthcare Group.
Sabra investors receive a very rich 4.8% distribution. The RBC price target is $35, and the consensus is lower at $32. The stock closed above that consensus level Monday at $32.97.
Ventas Inc. (NYSE: VTR) posted outstanding fourth-quarter results, with total revenue during the quarter amounting to $804 million, rising nearly 9.7% year-over-year. In 2014, the company made investments worth $2.4 billion, which included development and redevelopment investments that exceeded $100 million. Notably, most of these investments were made in seniors housing, loans and medical office buildings. The company is considered one the premier REITs in the industry.
Ventas shareholders are paid a 3.1% distribution. The RBC price target is $83, and the consensus target is $79.77. The stock closed Monday at $74.68 a share.
The right sector combined with solid yields make these stocks a great portfolio holding for growth and income investors. While rising rates can hurt REITs of all varieties, the very measured increases expected should not do any great damage to these top companies.