Health Care REIT: Slow and Steady Wins the Race

Health Care REIT (HCN) released its second-quarter earnings this week, and the results were broadly good. Funds from operations (FFO) came in at $1.09 per share, beating consensus estimates by a penny. HCN also reaffirmed its guidance for the full year, estimating that FFO will come in between $4.25-$4.35. That amounts to growth of 3%-5% over last year. Not amazing, but well above the inflation rate and certainly not shabby for a conservative health care REIT.

At the property level, the results were also broadly good. Same store net operating income (NOI) rose 3.2% year over year, and for the full year HCN’s management expects same-store NOI growth of 3.0%-3.5%. All told, a very solid quarter. So, is HCN stock a buy at current prices? Let’s take a look. Unlike most of its REIT peers, which tend to invest exclusively in the United States, Health Care REIT is also modestly diversified. It gets 84.8% of its net operating income from the U.S., but 8.4% and 6.8% from the UK and Canada, respectively. HCN is not the highest yielding REIT, but it sports a respectable dividend yield of 4.9% and has been a steady dividend grower for years. Over the past five years, HCN has grown its dividend at a 3.4% clip. Had you bought HCN five years ago, you’d be enjoying a yield on cost of 5.5% today.

Source: InvestorPlace

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