How My Top REIT Crushed the Market 4-to-1

The appeal of dividend stocks is simple: collect a healthy yield, with the upside of capital appreciation.

The average stock in the S&P 500 yields just 2%. This year the S&P 500 is up 9% year-to-date. Compared with an investment in U.S. Treasuries, that’s pretty attractive.

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One S&P dividend stock has done far better. The company is called Health Care REIT (NYSE: HCN). It’s one of the less well-known companies in the S&P 500 index. I wouldn’t be surprised if you’ve never heard of it.

I’m familiar with Health Care REIT because the company is one of my top income opportunities within the Million Dollar Portfolio.

As the name suggests, Health Care REIT is a Real Estate Investment Trust (REIT). Founded in 1970, the firm owns 1,246 health care facilities in the United States, United Kingdom, and Canada. Its properties include senior housing facilities, hospitals, and medical office buildings.

Health Care REIT doesn’t operate the facilities. Instead, the company leases space to health care companies. That means that the company is simply a landlord. Like other REITs, Health Care REIT pays most of its profits to investors in the form of a distribution or dividend. Based on the recent share price of $76, the company pays a current dividend yield of 4.2%.

Health care real estate is a $1 trillion business in the U.S. Health Care REIT – with a 2.3% market share – is a large player in a fragmented businesses. That means that there is tons of room for this company to continue growing through the acquisition of additional properties.

I’m bullish on Health Care REIT because of the demographics of an aging population. As the baby boomer population ages, there will be increased demand for health care services.

The company expects significant growth of older people in its three markets. Over the next 20 years, the population of people over the age of 74 will grow from 28 million to 52 million. That growth is more than five times the rate of the overall population growth.

An older population means more demand for health care. And that means more health care facilities, including nursing homes and hospitals. High demand should keep occupancy rates high. And that should translate to healthy rental rates and occupancy by health facility operators.

In last week’s issue of Income & Prosperity – Do You Own the Best REIT Stocks of 2014 – I told you that REITs have been the top-performing sector of the market. Thus far in 2014, the Vanguard REIT ETF (NYSE: VNQ) is up 25%.

Health Care REIT has performed even better. The stock is up 50% thus far in 2014. Among S&P 500 stocks that yield at least 2%, HCN is the single best performer.

2014 has been a great year to be invested in Health Care REIT. Good performance isn’t a new thing for this company. The stock has been a consistent performer ever since its IPO in 1992, with an average annual return of 16%.

The demographics of an aging population are a real tailwind for HCN. It seems unlikely that this stock will rise another 50% in 2015. But the 4% yield means that even normal capital gains could make it a winner.

I want to hear from you. Do you own investments that benefit from an aging population? Tell me how you’re investing in this growth trend. My email is [email protected]

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Published by Wyatt Investment Research at