An Obamacare Boost For Health Care REITs?
What does Obamacare care mean for health care real estate investment trusts (REITS) such as HCP (NYSE: HCP), Health Care REIT (NYSE: HCN), Healthcare Trust of America (NYSE: HTA) and Ventas (NYSE: VTR)?
Scott Peters, chief executive of Healthcare Trust of America, told MarketWatch this week that one of the side effects of the Affordable Care Act is that it forces the medical community to become more efficient. The emphasis on preventive medicine means more office visits to doctors and a higher rate of occupancy at medical plazas.
Below is a quick look at four leading health care REITs that may be poised to benefit, including how they have fared and what analysts expect from them.
HCP is the only REIT in the S&P 500 Dividend Aristocrat Index, due to its 29 straight year track record of dividend increases. The dividend yield is near 5.9 percent, and the company sports a market capitalization of around $16 billion. Its operating margin is greater than that of Health Care REIT or Ventas.
But only three of the 16 analysts surveyed by Thomson/First Call recommend buying shares of HCP. The mean price target, or where analysts expect the share price to go, is more than seven percent higher than the current share price. That target is well below the 52-week high.
Shares have pulled back about six percent in the past two weeks and fallen below the 50-day moving average, but they are still up more than two percent year to date. Over the past six months, the stock has underperformed the competitors featured here, and the broader markets as well.
Health Care REIT
Healthcare REIT is the largest U.S. medical REIT by assets, and more than 80 percent of its properties are privately funded and not dependent on Medicare or Medicaid. Its market cap is more than $16 billion, but it offers a dividend yield of about 5.4 percent. Note that its price-to-earnings (P/E) ratio is much greater than the industry average.
For at least three months, the consensus recommendation of analysts has been to hold shares. They see a little headroom for shares, as their mean price target is about four percent higher than the current share price. But here too, that consensus target is well below the 52-week high.
The share price is about seven percent higher year to date and still above the 50-day moving average despite pulling back in the past week. The stock has underperformed Healthcare Trust of America and Ventas over the past six months, but it has outperformed HCP.
Healthcare Trust of America
This REIT's revenue growth has outpaced the industry average slightly, and the CEO recently sold 100,000 shares. This Scottsdale, Arizona-based company has a market cap of less than $3 billion. Its dividend yield is near 4.9 percent, but the return on equity is less than three percent.
Just four of the 14 polled analysts recommend buying shares. The consensus recommendation has been to hold shares for three months. A move to the analysts' mean price target would represent a more than five percent gain for shareholders. Yet, shares traded higher than that earlier this month.
The share price is more than four percent higher than at the beginning of the year, despite retreating about two percent in the past week. The 50-day and 200-day moving averages formed a golden cross this week. Over the past six months, the stock has outperformed the others featured here but underperformed the broader markets.
CNBC's Jim Cramer called Ventas the "perfect combination of growth and yield" and includes the CEO among his "21 bankable CEOs." The REIT has a market cap of more than $17 billion and a dividend yield around 4.8 percent. The long-term earnings per share (EPS) growth forecast is more than 19 percent.
Only four of the 14 analysts surveyed recommend buying shares, but only three rate it at Underperform. Their mean price target is more than five percent higher than the current share price. The street-high price target suggests there is more than 26 percent potential upside.
The share price is about four percent higher year to date, but it has recently fallen below the 50-day moving average. The stock has outperformed competitors HCP and Health Care REIT over the past six months. It has also underperformed the S&P 500 in that time.
At the time of this writing, the author had no position in the mentioned equities.
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