Health Care REIT Attractively Priced

by Alligator Investor


Health Care REIT, Inc. (HCN), a real estate investment trust, invests in healthcare and senior housing facilities throughout the U.S.A. These include assisted living facilities, nursing homes, independent living communities, and specialty care facilities. The need to care for our growing population of senior citizens is not going to disappear, just because the economy is weak, or because the Democrats have gained control of Congress. HCN is well positioned to meet the need. The company has 477 facilities in 37 states managed by 58 different operators.

HCN has a market cap of 2.5B and a current yield of 6.18%. Looking at the Charts HCN has had only half of the price appreciation of the S&P 500 since 1992; however, the compound return of its high dividend yield would have more than made up the difference. The quarterly dividend has risen from $.52 in 1996 to $.64 at present. HCN has a low correlation to the broader market and it demonstrated from 2000 to 2003 that it can go up while the S&P is going down. The stock’s beta is .90.

HCN has had quite a run this year while investors have been seeking out investments with higher yields among the REITs, and it has gained more than 30% since the May lows. The short-term trend turned down after the elections, but now HCN has started rallying again and appears poised to start making new highs next week.

This may be a good time for aggressive investors to buy HCN. There appears to be good support between 35 and 36. I would consider HCN attractively priced in that zone, and I’m not going to chase it into the 40s.