Health Care REIT, Inc. (HCN), HCP, Inc. (HCP) – Alzheimer’s: A Growth Market For Healthcare REITs

More Diversification

HCP, Inc. (NYSE:HCP) is another giant in the Health Care REIT, Inc. (NYSE:HCN) space. Its portfolio, however, is more diversified, including senior housing, skilled nursing, life science, medical office, and hospital properties. Despite the broader industry view, about two-thirds of its over 1,000 facility portfolio is related to senior care in some way.

Like healthcare REIT, HCP, Inc. (NYSE:HCP) is so big that it needs to do a lot of deals to fund growth. For example, in 2012, the REIT made about $2.5 billion worth of investments. Finding big deals is going to get increasingly difficult and HCP, Inc. (NYSE:HCP) has stiff competition. But a large market should allow for acquisition driven growth for at least the immediate future.

The company has a long history of annual dividend increases and yields around 4.4% after the broad REIT sell off. It is a good option for conservative investors looking for a one-stop shop in the healthcare REIT sub-sector.

An Up and Comer

At nearly 500 buildings, Omega Healthcare Investors Inc (NYSE:OHI) Investors’ portfolio of properties is around half the size of the two REITs above. Its portfolio consists of nursing facilities, assisted living facilities, and other specialty hospitals across 33 states.

Omega Healthcare Investors Inc (NYSE:OHI)’s portfolio is heavily tilted toward skilled nursing facilities. That makes third party payment issues a big concern. However, as the new healthcare laws take effect, any confusion here should slowly get cleared up. The added risk, however, has left the REIT with a yield discount to the pair above.

With a long history of annual dividend increases and an around 5.7% yield, this is a good option for more aggressive income investors. And, with a smaller portfolio, growth will be easier to come by.

Even if You Wait

This trio is a great group of stocks that will all benefit from increased demand for Alzheimer’s care. The REIT pullback has brought their prices down to more reasonable levels. Those concerned about a deeper REIT sell off, however, should hold off on investing in HCP, Inc. (NYSE:HCP), healthcare REIT, and Omega Healthcare Investors Inc (NYSE:OHI). However, you should still put them on your watch list. Yields in the 6% range for the two larger companies would be ideal, with smaller Omega Healthcare Investors Inc (NYSE:OHI) a good deal in the 8% area.

Reuben Brewer has positions in HCP and Health Care REIT. The Motley Fool recommends Health Care REIT. Reuben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Alzheimer’s: A Growth Market For Healthcare REITs originally appeared on Fool.com is written by Reuben Brewer.

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