The pandemic has been both good and bad for the health-care sector, and while it stands to reason that this is a most essential of essential industries, investors need to be aware that not all health-care stocks are created equal.
For instance, many senior-care facilities were hit hard by COVID-19 outbreaks that led to high vacancy rates caused both by -- tragically -- deaths and by families avoiding placing their loved ones there. Labor shortages have hurt, too, and operators -- including some prominent real estate investment trusts (REITs) -- saw rent payments fall, share prices suffer, and dividend payouts stagnate or decline.
But operators of medical facilities such as hospitals and specialists' offices have fared somewhat better. Take, for instance, Physicians Realty Trust (NYSE: DOC) and Medical Properties Trust (NYSE: MPW). They're both REITs, but with very different portfolios. The former specializes in medical offices, the latter in hospitals. Neither has seen a lot of share price growth over the past year or so, but they are consistent payers of dividends, providing cash while shareholders wait for prices to appreciate. In others words, they're good income stocks and candidates for a buy and hold.
Here's a bit more on each of these real estate investments.
Image source: Getty Images.
Physicians Realty Trust
Milwaukee-based Physicians Realty Trust buys, develops, owns, and manages health-care properties leased to physicians, hospitals, and health-care delivery systems. The tenants of its 275 buildings occupy about 14.5 million square feet include a range of specialties. Oncology/hematology make up about 13% of the portfolio and ambulatory surgery and primary care are each about 10%.
This is both a growing and indispensable business, and major acquisitions are essential to this strategy. For example, on Oct. 1, Physicians Realty said that it had agreed to pay about $764.3 million for 15 Class A medical buildings located on or affiliated with health-system campuses in eight states, adding nearly 1.5 million square feet to its portfolio.
Those new holdings are about 95% leased, with a weighted average remaining lease term of 7.4 years. That will add to the stability of a portfolio that has been paying $0.23 per share in dividends quarterly since June 2017. That payout gave it a yield of 5.14% at a share price of $18.27 as of midday on Dec. 21. The share are about 6.7% below the 52-week high of $19.59 on June 15.
Medical Properties Trust
Medical Properties Trust (MPT) is a Birmingham, Alabama-based owner and developer of hospitals -- one of the largest, in fact. The company has about 440 facilities with 46,000 licensed beds operated by 52 tenants in nine countries on four continents.
MPT has been actively buying, selling, and partnering through the pandemic, including with private capital investor Macquarie Asset Management. In a recent deal, Macquarie paid $1.78 billion for a 50% interest in eight Massachusetts-based general acute-care hospitals owned by MPT. The company also completed a new 15-year lease to HCA Healthcare for five hospitals the trust owns in Utah.
This kind of activity -- long-term leases to blue-chip medical providers -- backs up the assertion by Edward Aldag Jr., MPT's chairman, president, and chief executive officer, that its dividend remains well-covered by lease payments and consistent growth in its funds from operations (FFO).
"We have never felt better about our range of attractive capital options and investment opportunities than we do today," Aldag said in the company's third-quarter earning report on Oct. 28.
MPT stock traded at $22.60 as of midday on Dec. 21, down a bit from its 52-week high of $22.82 on April 26. The yield was 5.04% based on an annual dividend pay out of $1.12 per share. That's $0.28 per share in each quarter of 2021 and up roughly a penny a quarter each year since 2013.
Two good investment candidates for the pandemic and beyond
Opportunities for reliable dividend income and capital appreciation still exist during this continuing pandemic and, given the essential nature of the health-care industry itself, should continue if and when COVID-19 (with all its variants) goes away. For this reason, these two REITs can be good health-care stocks to consider investing in now.
10 stocks we like better than Physicians Realty Trust
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Physicians Realty Trust wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of December 16, 2021
Marc Rapport owns Medical Properties Trust. The Motley Fool recommends HCA Healthcare and Physicians Realty Trust. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
