I'm Donny. I'm a world traveler, investor, entrepreneur, and online marketing aficionado who has a big appetite to compete and disrupt big markets. I thrive on being able to create things that impact change, difficult challenges, and being able to add value in negative situations.
Looking forward to 2023, healthcare real estate investment trusts (REITs) appear to be a valuable investment.
As the United States continues toward healthcare expenditure of $6.2 trillion by 2028, organizations investing in healthcare facilities provide investors with a way to benefit from this expanding sector.
However, not all healthcare REITs operate in the same way. In this review, we take a look at the current price, dividend yields and operational factors — such as costs and growth — to see which healthcare REITs are the top 10 to invest in for 2023.
Top 10 Best Healthcare REITs
- American Healthcare REIT
- Medical Properties Trust
- Sabra Healthcare REIT
- Physicians Realty Trust
- NorthStar Healthcare Income
- Summit Healthcare REIT
- NorthWest Healthcare Properties REIT
- Ventas
- Diversified Healthcare Trust
- Omega Healthcare Investors
Yieldstreet is an alternative investment platform focused on generating income streams for investors. Get exclusive access to private market investments.
American Healthcare REIT (GRAH)
A fusion of two different REITs and a healthcare investing group, American Healthcare REIT (GRAH) manages $4.2 billion in properties, totaling 312 campuses and facilities.
The company maintains over 100 healthcare managers as part of its consulting and managerial support, and its main concerns are medical office buildings, senior living and skilled nursing services.
- Current price: $7.51
- Dividend ratio: 4.98%
- Risk level: Moderate
- Growth potential: Moderate
Why we recommend it: GRAH represents what we believe is the best general healthcare REIT on the market right now. The company is widely diversified across the sector and is in discussion with the SEC regarding a new public listing sometime in the future.
Medical Properties Trust (MPW)
Medical Properties Trust (MPW) is a REIT focusing on hospitals and related infrastructure. It owns 447 facilities across 32 states, Europe, Australia and South America.
- Current price: $10.87
- Dividend ratio: 8.41%
- Risk level: Moderate
- Growth potential: High
Why we recommend it: MPW was the first company to focus on hospital real estate, propelling it to the second-largest nongovernment owner of hospital real estate.
The REIT’s 29 percent annual compound growth owes much to its focus on international expansion and re-investment growth.
Sabra Healthcare REIT (SBRA)
The Sabra Healthcare REIT (SBRA) focuses on nursing facilities and attention to the care needed at these locations. It manages 441 investments, 61 percent of which relate to skilled nursing facilities across all fields of medicine.
The company was also the first REIT to achieve full compliance with the WELL Health safety rating system.
- Current price: $13.27
- Dividend ratio: 9.13%
- Risk level: Low
- Growth potential: Moderate
Why we recommend it: Nursing facilities make up most of the outpatient care seen today, putting SBRA in a healthy position over the next decade.
The company’s average remaining property lease time is seven years, further increasing its potential longevity.
Physicians Realty Trust (DOC)
The Physician Realty Trust (DOC) is a REIT focusing on medical care facilities run by physicians and similar healthcare professionals.
The REIT invests in properties focusing on excellent patient care, balanced against a lower-than-average debt ratio to improve returns over the long term.
- Current price: $14.54
- Dividend ratio: 6.31%
- Risk level: Low
- Growth potential: Moderate to high
Why we recommend it: DOC is a great choice for anyone looking for a conservative medical REIT to invest in. Its properties tend to produce high returns, and the dividend payout regularly increased over the last decade.
NorthStar Healthcare Income (NHHS)
NorthStar Healthcare Income (NHHS) is a healthcare REIT focusing on senior care facilities. A combined 90 percent of its $2.4 billion holdings lies in senior care and skilled nursing investments.
- Current price: $0.88
- Dividend ratio: 0%
- Risk level: High
- Growth potential: Moderate
Why we recommend it: Price action for NHHS has been rocky lately, but its holdings are good. Senior care facilities will continue to be safe investments for the next decade, regardless of what current market forces seem to indicate.
Summit Healthcare REIT
The Summer Healthcare REIT is an investment trust dedicated to assisted living facilities. As of 2019, the trust manages over $500 million in assisted care facilities across 57 different assets.
- Current price: $9.88
- Dividend ratio: Unknown
- Risk level: High
- Growth potential: Moderate
Why we recommend it: Summit Healthcare doesn’t openly display its financial information to the same extent that other REITs do.
However, this privacy comes at the benefit of the REIT having done well over the last seven years. Even now, during the current downturn, Summit maintains a similar price to what it had a year ago.
NorthWest Healthcare Properties REIT (NWHUF)
The NorthWest Healthcare Properties REIT (NWHUF) manages investments almost entirely focused on medical facilities and office buildings.
While it has a small two percent of its holdings in life science laboratories, this REIT focuses on investing in the physical locations healthcare companies need to work.
- Current price: $10.67
- Dividend ratio: 7.87%
- Risk level: Moderate
- Growth potential: Moderate
Why we recommend it: NWHUF maintains a large collection of almost-full occupancy investments, giving it a staying power other investment trusts generally don’t hold.
Combined with real estate’s general trend to gain in value, this indicates that NWHUF will see growth over the next decade.
Ventas (VTR)
Ventas (VTR) is a REIT that primarily invests in senior living facilities, which represent almost 50 percent of its current holdings. The company owns over 1,200 locations, totaling over $4.5 billion in asset worth.
- Current price: $38.64
- Dividend ratio: 4.48%
- Risk level: Low
- Growth potential: Low
Why we recommend it: VTR offers both a solid foundation of managed assets and consistent dividend payout history going back over 10 years.
Additionally, VTR puts a lot of effort into maintaining corporate responsibility to its clients, continuously striving to improve the care of its patients.
Diversified Healthcare Trust (DHC)
Diversified Healthcare Trust (DHC) is a REIT that maintains a mixed asset balance, with a heavy focus on medical offices and senior living facilities.
This asset mix totals $6.9 billion in value across 36 states and Washington, D.C.
- Current price: $1.20
- Dividend ratio: 3.23%
- Risk level: Low
- Growth potential: Moderate
Why we recommend it: Only seven of DHC’s 378 properties have any sort of capital leases or mortgages on them, meaning that DHC maintains a mostly debt-free asset base.
For this reason, investors won’t have to worry about interest rate hikes affecting their investments, making DHC a safer investment than most other REITs.
Omega Healthcare Investors (OHI)
While Omega Healthcare Investors (OHI) manages some senior living, its portfolio is 82 percent skilled nursing facilities. Its holdings are across 40 states and the United Kingdom, maintaining an average of 90 percent occupancy for its facilities.
- Current price: $31.36
- Dividend ratio: 8.64%
- Risk level: Moderate
- Growth potential: Moderate
Why we recommend it: OHI has offered investors stable stock prices and a stable dividend yield of over seven percent for the last 10 years.
That kind of dividend payout and security is rare across the stock market, let alone the REIT sector.
5 Healthcare REIT Honorable Mentions
While we didn’t include them in our top 10 list, we recommend you also check out some of these REIT stocks and exchange-traded funds (ETFs):
- Vanguard Healthcare ETF: This passively managed index fund invests across the healthcare sector, paying an average 1.3 percent dividend alongside its moderate growth.
- CareTRUST REIT: Investing in senior and assisted living facilities, this fund generates a 6.2 percent dividend yield and averages a nine percent return on reach facility investment per year.
- Welltower: The first healthcare REIT to invest in generating healthcare infrastructure, Welltower generates a 3.1 percent dividend and maintains a moderate buy rating from most economists.
- Universal Health Services: This large healthcare service from Pennsylvania generates a 0.86 percent dividend yield, maintained under stock price volatility over the last seven years.
- Community Healthcare Trust: This trust manages roughly 160 healthcare facilities across 34 states, generating a 5.5 percent dividend yield and a downward price trend since February 2020.
What Are Healthcare REITs?
Healthcare REITs are real estate investment trusts that invest money into healthcare facilities. These REITs invest in different kinds of healthcare real estate, depending on the goals or focus of the REIT.
Some examples of these real estate types include:
- Medical offices: Medical office buildings can be both office space for medical facilities and processing centers for insurance claims and hospital administrative staff.
- Hospitals: REITs invest in small, private, and large hospitals all over the world.
- Nursing homes: Skilled nursing facilities able to tend to their patient’s needs see greater investment as the aging population increases.
- Senior living: Senior housing facilities fall under this category of real estate investments.
- Assisted living: Some families prefer to have someone visit or live with their elderly relatives at home, leading to REITs investing in these services.
Similar to other REITs, healthcare REITs operate like dividend stocks on the New York Stock Exchange, paying out to holders based on the stock’s price and the company’s revenue for the year or quarter, depending on their structure.
Benefits of Healthcare REITs
To best understand why healthcare REITs are a potentially strong investment opportunity, here are some benefits of healthcare REITs as an asset class:
Growth of the healthcare industry – Developments in healthcare allow more treatments and medicines to reach the population.
The growth of healthcare tech makes healthcare more accessible, increasing the total patient count and, therefore, demand.
Aging population – As the baby boomer generation continues to age over the coming years, an increasing amount of healthcare and new facilities is required to tend to the rising patient load.
Rising rental rates – With increasing interest rates at the federal level, healthcare REITs will increase rent prices to keep up on mortgages and similar debts.
This could lead to REITs bringing in larger revenues, depending on how the market tolerates these interest hikes.
Low supply, but high demand – Right now, there are not enough facilities to meet the overall demand for healthcare. New construction of facilities by REITs can help provide care to patients while also generating revenue for holders.
Development of new properties – If well managed, new properties can act as a revenue source for a REIT for decades.
This allows the stock price of the REIT to increase as it reinvests its revenue into newer properties or sees an increased valuation of its holdings.
Risks of Investing in Healthcare REITs
Although healthcare real estate investment trusts can be a great investment, they come with some risks. These are not risks inherent to all investments but rather are unique to the world of healthcare REITs:
Too much debt – Healthcare facilities require large mortgages to build. REITs that focus on building new facilities incur this debt as a risk to build their holdings, which can be an issue when the economy hits a recession.
Pandemic risk – As we have seen recently, pandemics could tax healthcare systems, causing them strain from the number of patients.
A healthcare facility that fails due to overactive demand or shortages can put pressure on a REIT’s ability to finance its investments.
Higher interest risk – The debts incurred by most healthcare REITs come with higher interest rates due to the extra risks associated with following care facility building codes.
Higher interest means larger repayments, an expense that can hurt the company if revenue falls off.
Increased competition – With an increasing elderly population, more businesses see opportunities to get a slice of the growing healthcare pie.
Increased competition can improve conditions for the field overall, but not for individual companies that cannot keep up.
Oversupply – There are some occasions where too many providers exist in an area. This can happen with just a few institutions in a small area if the medical niche is specific enough.
A REIT that invests in too many of these failed projects can lose its liquidity or go under.
Lack of tenants – Even with an increased demand for healthcare, the medical field requires specialized permits and licenses to operate.
How to Buy Healthcare REITs
Regardless of which healthcare REITs you want to invest in, the steps you will take to acquire their shares will be the same.
Follow these steps to obtain your desired amount of REIT stocks:
- Choose a platform that provides access to the REIT you want to purchase.
- Create an account with the platform if you have yet to do so.
- Confirm your payment method, which is generally a bank account.
- Search for the ticker symbol of the REIT you want to purchase.
- Choose the amount of stock you wish to purchase.
- Confirm all the payment details before finishing the purchase.
Invest in stocks, options, and ETFs, all commission-free, $0 minimum deposit. Sign up and open an account to get your first free stock!
Summary
Regardless of which area of healthcare you invest in, signs are pointing to healthcare companies doing well over the next decade.
The best practice you can take now is to research the REITs and ETFs listed above to see which ones make the most sense for your portfolio.
Healthcare REIT FAQs
Here are answers to some of the most common questions people have asked about healthcare REITs.
Are medical REITs a good investment?
Medical REITs can be a good investment for both growth and revenue strategies. A REIT stock has to pay out a certain percentage of its revenue to stockholders, resulting in high dividends compared to other big companies.
What is the difference between a hospital and healthcare REITs?
Hospital REITs focus on investing in hospitals and related facilities, while healthcare REITs will invest in all healthcare-related real estate.
Insurance offices, nursing homes, senior living facilities and outpatient facilities all fall under what a generic healthcare REIT might invest in.
What is the typical yield for healthcare REITs?
Many healthcare REITs offer a high yield due to the United States law requiring a high payout by these companies.
In general, healthcare REITs have a payout ratio of between five and nine percent dividends each year.
Yieldstreet is an alternative investment platform focused on generating income streams for investors. Get exclusive access to private market investments.
I'm Donny. I'm a world traveler, investor, entrepreneur, and online marketing aficionado who has a big appetite to compete and disrupt big markets. I thrive on being able to create things that impact change, difficult challenges, and being able to add value in negative situations.
More Posts
