Healthcare REITs are on sale these days. They are the perfect defensive play for income hungry investors.
Yes, we are in a full blown healthcare crisis with the coronavirus pandemic:
Doctor’s offices were closed to lucrative patient visits and elective procedures.
Hospitals postponed minor and major surgeries to keep up with Covid-19 patients.
Even as healthcare facilities open up, some rents due to REITs could be in jeopardy or at least delayed impacting cash flow.
Where does this leave REIT investors?
The healthcare market isn’t going away. If anything, a sudden surge in healthcare related demand should come as the economy re-opens.
And a number of the healthcare REITs that sold off during the March meltdown have started to see their stock prices recover while maintaining their dividend payments.
Long-Term Outlook for Healthcare REITs
The long-term outlook for healthcare REITs remains bullish.
An aging population … advances in healthcare technology … life extending medicines … and absolute focus on healthy a lifestyle will drive this market for years to come.
The pandemic will leave most people even more focused on preventable, practical and treatable healthcare.
Yes. Virtual diagnostics is now a reality and will increase in the future, meaning many more consultations will be done over an internet connection.
But doctors are still going to need office space to house staff and continue to see many patients in person.
Hospitals will still receive, treat and heal sick and injured patients.
And those places will continue to work with smart and experienced hospital and facility operators like these healthcare REITs. This creates a good long-term market opportunity for income investors.
Here are 3 healthcare Real Estate Investment Trusts (REITs) on sale now!
Medical Properties Trust (MPW)
Here is a healthcare REIT that has seen its share of market sickness.
Medical Properties Trust (MPW) started in business during the bear market recession of 2000 to 2002 and is one of the largest hospital operators in the country.
MPW’s business is straightforward: They acquire, develop and lease healthcare facilities to experienced healthcare operators providing state-of-the-art healthcare services. They also make mortgage loans to healthcare operators.
They are the premier source of funds for new and existing healthcare operators.
MPT’s financing model facilitates acquisitions and recapitalizations and allows operators of hospitals to unlock the value of their real estate assets to fund facility improvements, technology upgrades and other investments in operations.
This medical REIT only pays out what it earns — and that follows a good policy of adhering to payout ratios that are under 100% of earned income.
It leases it facilities to experienced healthcare operators pursuant to “Triple” long-term net-leases.
This means that the tenant has to bear most of the costs associated with the property like insurance, maintenance and repairs.
High tenant profitability has ensured high occupancy, which keeps the revenue flowing. MPW will continue to reward income investors.
Medical Property Trust (MPW) Key Data
Dividend per Share: $1.08
Dividend Growth (5 Yr. CAGR): 3.96%
Payout Ratio: 75.93%
Long-Term Debt/Assets: 52.78%
Market Cap: 9.0B
Global Medical REIT (GMRE)
Here is a healthcare REIT on sale that you can own and generated steady income for the next 10 years.
Global Medical REIT is growth machine when it comes to owning and leasing medical offices for physicians and doctors.
I see medical offices popping everywhere around where I live … and even after the pandemic they are not going away.
Yes, GMRE is not yet a large player but they are well diversified and spread-out geographically.
And during the pandemic, they’ve continued to enjoy healthy occupancy rates and planned tenant rent. Even in the middle of the full blown crisis in April, GMRE collected 96% of their rents.
They are loaded up with Long-Term Triple Net leases where the tenant pays for property tax, insurance and maintenance.
Acquisitions have been the main catalyst for their successful growth. In 2019 GMRE completed 16 acquisitions for a total purchase price of $239 million with an average cap rate of 7.5%
GMRE’s Portfolio has grown from $93 million at IPO to $879 million of Gross Real Estate Assets or 52%.
GMRE sold off during the pandemic and is trading at a discount to its peers but they are a healthcare REIT bargain at the current price.
Omega Healthcare Investors, Inc. (OHI)
Ok, this last one is tricky.
Omega is a real estate investment trust that invests in the long-term healthcare industry, primarily in skilled nursing and assisted living facilities.
Are you kidding me? Invest in assisted living facilities now? When they’ve been the “hot” spots of Covid-19 deaths?
First, the aging of the “baby boomers” is just in the first inning with a long way to go.
Second, long-term assisted living care isn’t going anywhere. Yes, maybe more people will try to “age-in-place” but not everyone can manage that … both physically and financially.
Third, OHI has a long history of producing predictable profit margins during economic challenging times.
Its portfolio of assets is operated by a diverse group of healthcare companies, predominantly in a triple-net lease structure.
And they are slaves to dividend payments … with a trustworthy payment schedule.
Yes, OHI faces a short-term uphill battle but as long as they hold up their dividend payments and manage through this crisis, investors will be rewarded over the long haul.