Seniors Housing Weekly Update - Looking for Yield in Health Care REITs

March 10, 2015

March 10, 2015. 60 Seconds with Steve Monroe. Even with the threat of rising interest rates, there are long-term benefits to investing in health care REITs...

Looking for Yield in Health Care REITs

Last week, there was some noise from the Federal Reserve that they may start increasing interest rates a little sooner than most people expected. Well, that sent most health care REIT stocks tumbling, many by 4% to 5% that day. Yes, REITs have been riding high for a while, but where else can you find dependable yields in the 4.5% to 7.0% range? Is now a good time to invest in health care REITs? For a short-term investor, I would say no, because the interest rate risk is reasonably high for the remainder of the year. For long-term investors? The yield on your cost basis is only going to rise because the health care REITs almost uniformly increase their dividends once a year, and a few more frequently. So you are going to be locking in that current yield on your cost basis as a minimum, with it rising every year. So you could see your yield increase by 10 to 20 basis points a year. And, REITs rarely decrease or suspend their dividends, which is the kiss of death with investors. So if long-term yield is what you want, health care REITs deliver. Even if we are approaching a bubble.

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