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Wednesday April 25, 2012
Senior Housing: A demographic buy
by Lisa Springer, contributing editor Street Authority The greatest demographic trend affecting the US today is the aging of the baby-boomer generation. Starting this year it is estimated that 10,000 baby boomers will retire every day. One of the best ways to invest for this demographic is to own health care REITs. To identify the best health care REITs, I ran a screen for companies with positive five-year earnings and dividend growth, less debt than equity and a current dividend yield higher than 5%. These metrics establish some level of safety and a good starting point for narrowing down the field. My top pick overall is Senior Housing Properties Trust (SNH) because of its generous 7% dividend yield and comparatively low exposure to Medicare/Medicaid cuts, Senior Housing is the fourth-largest health care REIT on the stock market. The company owns 378 properties spread across 39 states and has an investment portfolio valued at more than $5 billion. Compared to other health care REITs, Senior Housing has a more secure income stream because 90% of the company's income comes from private-pay properties and not from facilities that rely on Medicare and Medicaid reimbursement. Senior Housing made more than $1 billion of acquisitions last year. As a result, the REIT metric for cash flow, funds from operations (FFO), rose 18% to $258 million in 2011 from $219 million a year earlier. FFO provided 140% coverage of the dividend. Analysts target 8% income growth for the REIT this year. Senior Housing has a solid balance sheet with debt at 74% of equity and an investment grade rating from Moody's and Standard & Poor's. Senior Housing has increased its dividend in each of the past 10 years and grown the dividend roughly 3% a year in the past five years. The last increase was a 2.7% hike in October to a $1.52 annualized rate. These shares currently yield about 7.2%. Learn more about this financial advisory at Street Authority. Related articles: 
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