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HCP: I Don't Recommend This 4.7%-Yielding Healthcare REIT Anymore

Published Mon, 11 Feb 2019 10:25:19 -0500 on Seeking Alpha

HCP, Inc. (HCP) is a promising income play for dividend investors in the healthcare REIT sector, but only at the right price. The healthcare real estate investment trust faces favorable long-term industry trends, has a strong balance sheet, and covers its dividend with AFFO. That said, though, the REIT's shares do not make an attractive value proposition for long-term dividend investors based on today's stretched valuation. In addition, HCP is at the brink of being overbought, potentially exposing investors to a correction over the short term. An investment in HCP yields 4.7 percent.
HCP - Portfolio Overview
HCP is a healthcare real estate investment trust with large investments in senior housing properties, medical office buildings, life science buildings, hospitals, and other healthcare-related facilities. Senior housing and medical office buildings account for the lion share (61 percent) of HCP's property investments.
Here's a breakdown by property type.
Source: HCP Investor Presentation
HCP benefits from an aging U.S. population and rising healthcare expenditures, especially as it relates to advanced age cohorts (80+). Strong projected growth in U.S. elderly demographics bodes well for HCP's senior housing part of the property portfolio going forward.
Source: HCP
At the same time, HCP benefits from increasing demand for outpatient care. Patients require easy, cost-effective and efficient visits to healthcare professionals, which is why outpatient... Read more