6 REITs for an Aging Baby Boomer Population

Few demographic trends are as well defined as the aging of the American population. Equally entrenched, according to the contributing investment experts at MoneyShow.com, is the rising demand for healthcare properties such as senior living, skilled nursing and/or assisted living facilities. Mark Skousen, High-Income Alert Every day, 10,000 baby boomers become Medicare-eligible. The oldest boomers were born in 1946. That means they turned 72 this year. And as their health inevitably declines, many will need assisted living facilities. If you've shopped for nursing homes -- either for yourself or family members -- you quickly learned two things. Great properties are hard to find. And when you do find them, they are either fully occupied, expensive -- or both. Some companies are making an awful lot of money filling a vital social and medical need. One of them is CareTrust REIT . Based in San Clemente, Calif., CareTrust is a real estate investment that acquires and leases healthcare and housing properties across the nation. It currently has 194 properties -- with more than 19,000 beds -- in 24 states. Its portfolio is comprised of 70% skilled nursing facilities, 22% assisted living facilities and 8% campuses that contain both. CareTrust is led by an experienced management team with over 55 years of collective experience. The numbers are superb. Earnings are growing 28% year over year on a 20% increase in revenue. The trust enjoys a whopping 46% operating margin. I estimate that net income will rise from $0.73 a share this year to more than a dollar a share in 2019. CareTrust shares yield 4%, paid quarterly. Based in Birmingham, Ala., Medical Properties is a REIT that acquires and develops health care facilities, including acute care hospitals, inpatient rehabilitation centers and medical and surgical facilities. It doesn't just operate in the largest and fastest-growing segment of the U.S. economy. By handling the most pressing business needs of these providers -- arranging financing and offering long-term triple-net leases -- it improves the quality of health care. By operating as a REIT, Medical Properties avoids corporate taxes as it must pay out at least 90% of net cash flow to shareholders in the form of dividends. As a result, the yield here is an attractive 5.4%. And that dividend will rise with earnings in the months ahead. Tom Hutchinson, Cabot Dividend Investor Community Health Trust , with a yield of about 5%, is an interesting real estate investment trust (REIT). It operates a portfolio of properties that provide outpatient health services in non-urban areas throughout the U.S. This is a good, solid recession resistant business. But unlike most notable securities of this type, Community Health is small and less well established. The downside of that is that the numbers (debt, dividend history, down market track record) are not up to the level I like to see in a security of this nature. The upside is that it has a much higher level of earnings and dividend growth than its subsector peers. It's expected to grow earnings at a rate of over 20% for the next three years. But its relative weakness was put to the test in the recent down market and it passed with flying colors, outperforming the overall market as well as the REIT index. Ned Piplovic, DividendInvestor Omega Healthcare Investors is a real estate investment trust that finances sale, leaseback, construction and renovation of long-term health care facilities. Its merged with Aviv REIT in 2015, which created the largest publicly traded REIT in the U.S. dedicated specifically to skilled nursing facilities. Despite an impressive record of annual dividend hikes, the company recently ended a streak of boosting its dividend payout amount every quarter for nearly six years. After raising its quarterly dividend for the 23rd consecutive period at the beginning of 2018, the company paid the same amount for the remaining three quarters of the year. While some investors might see this move as cause for concern, the REIT's fundamentals, share price trend and even technical indicators still point to a continued growth trend. In addition to the robust dividend growth, the company rewarded its shareholders with a steady share price growth for double-digit percentage total returns over the past several years. The company's steady dividend income flow provides a yield of around 7% -- making this stock attractive to investors seeking asset appreciation, as well as steady income distributions with annual dividend hikes. Since beginning the current streak of annual dividend hikes in 2004, the company enhanced its total annual dividend payout amount 340%. This record of consecutive annual dividend hikes corresponds to an average growth rate of more than 10% per year. The share price decline between the beginning of 2015 and April 2018 limited the shareholders' total returns over the past three years to 37.7%. However, the rapid share price ascent since April 2018 combined with dividend payouts for a 57.5% total return over the past 12 months. John Freund, Bull Market Report Healthcare is a sector every investor should be invested in, given the fact that baby boomers are retiring at a rate of 10,000 per day, offering the demographic tailwinds to Ventas , which is primed for long-term growth in the healthcare REIT space. This company operates on a RIDEA structure that permits it to actively manage its own properties instead of leasing to operators. Ventas is no passive landlord, but financially engaged with its operations through upfront capital expenditures and managerial costs, participating directly in their properties' ultimate success or failure. We like this REIT's structure because they have more flexibility to make changes to their properties based on customer needs. It should be no surprise then that RIDEA REITs sport higher-than-average occupancy rates. Disruptive technologies like artificial intelligence and cloud computing are changing the game for healthcare operators, and soon costs will be coming down across the board. When that happens, we suspect companies like Ventas will leap ahead of competitors on margins and profitability. Ventas has a grade-A management team. They've managed to raise the dividend by an annualized rate of 8% over the last 18 years and have done so while maintaining a relatively low debt-to-EBITDA ratio. The REIT is currently yielding around 5%. We love it when companies grow without a reliance on debt, and Ventas has also managed to return an astounding 2400% to shareholders since the current CEO took over nearly two decades ago. This has been one of the most bankable stocks and dividends in the healthcare REIT space, and we foresee more of the same in 2019 and beyond. Brett Owens, Contrarian Outlook Sitting around and collecting monthly dividend checks is nice, but the best plays are going to have a growth component. That's what makes senior-living REIT LTC Properties an ideal position -- it's a play on the unstoppable mega-trend of the aging baby boomers. LTC Properties invests in and finances senior-living centers, boasting a portfolio of 205 properties -- split into 103 assisted-living centers, 95 skilled-nursing properties and seven others -- across 28 states. It also focuses on long-term property leases that typically span 10 to 15 years, which has a stabilizing effect on cash flow. Better still, roughly three-quarters of the company's leases and loans won't mature until after 2024. The company has years of steady cash flow ahead. LTC Properties suffered a small setback in 2018, with FFO sliding slightly from the previous year. But all the while, the REIT increasingly is looking like a bargain. The company yields about 5% (well more than double the S&P 500 average payout), on a very stable dividend that makes up just 76% of FFO. And the price is right: shares have dipped below 15.0 times FFO.

6 REITs for an Aging Baby Boomer Population

Some companies are making an awful lot of money filling vital social and medical needs. Five investment experts give their stock picks for the rising demand for healthcare properties.

Columnist Conversation

More Insider Buying in American Woodmark (AMWD)

This Weekend on Real Money

Stocks Under $10

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.