Risk-Reward Balanced at Health Care REIT - Analyst Blog

On Apr 10, 2014, we issued an updated research report on Health Care REIT Inc. HCN.

On Feb 19, Health Care REIT reported fourth-quarter 2013 normalized FFO of 99 cents per share, 2 cents ahead of the Zacks Consensus Estimate and up 14 cents year over year. The 16.5% year-over-year increase is primarily attributable to robust revenue growth, decent same-store cash net operating income and notable portfolio restructuring activity.

Health Care REIT's diversified portfolio allows it to explore opportunities in different markets based on individual market dynamics. The company is strengthening its focus on high-barriers-to-entry affluent markets around the world, through strategic investments and non-core assets dispositions. In addition, aging population and rise in senior citizen spending for healthcare reasons bode well for this healthcare REITs growth, going forward.

Moreover, Health Care REIT has established a track record of conservative capital management as well as cash returns to shareholders in the form of steady dividends. In Feb 2014, the company paid its 171st consecutive quarterly cash dividend. The company paid 79.5 cents per share, reflecting a 4% sequential hike, which enhanced investors' confidence in the stock.

However, intense competition and continuous acquisitions on the company's part are expected to raise upfront operating expenses. Also, the anticipated rise in interest rate is a concern for Health Care REIT, particularly for the company's substantial exposure to long-term leased assets.

Over the last 30 days, the Zacks Consensus Estimate for FFO per share remained flat at $4.02 per share for 2014. For 2015, it moved south by 2 cents to $4.20. The stock currently has a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Investors interested in the REIT industry may consider stocks like Cousins Properties Inc. CUZ, Duke Realty Corp. DRE and Public Storage PSA. All three stocks have a Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, are obtained after adding depreciation, amortization and other non-cash expenses to net income.