Top 2 Income Plays On The Baby Boomers

The aging U.S. population is poised to create quite an opportunity for a number of industries, one of which is health care.
But it goes beyond that, especially for income investors. The real estate investment trust (REIT) space is one of the best places to find income.
What some investors don’t realize is that it’s also one of the best ways to capitalize on the aging of Baby Boomers.
Baby Boomers — those born in the U.S. between 1946 and 1964 — first started turning 65 in 2011. In 2012, Baby Boomers made up over 24% of the U.S. population.
Growth of the 65-and-older U.S. population is expected to explode over the next few decades. The nation’s population of those 65 and older will nearly double from 2012 to 2050.
That means there will be a lot of people piling into nursing homes and needing long-term care. The outlook for health-care facilities is very positive.

Top Two Income Plays on the Baby Boom

No. 1 Income Play On The Baby Boom: Health Care REIT (NYSE: HCN)

Health Care REIT offers a 5.1% dividend yield. It has boosted its dividend payment for 171 straight quarters. This REIT focuses on various health-care facilities, including assisted living, skilled nursing and independent living.
Health Care REIT has nearly 1,200 properties across 46 states. The majority of its portfolio includes senior housing facilities, but the REIT also has a strong presence in skilled nursing facilities.
Last year it spent $5.7 billion to acquire Sunrise Senior Living, which operates over 300 senior living communities. This move helps give Health Care REIT even more exposure to properties that will benefit from an aging U.S. population.
Health Care REIT is also active in turning over its portfolio. It divested over $500 million in non-core properties last year and recognized nearly $50 million for the sale of those properties. It will then use that money to reinvest in higher yielding properties.

No. 2 Income Play On The Baby Boom: Ventas (NYSE: VTR)

Ventas’ dividend yield is 4.5%. The REIT has raised its dividend at an annualized 9% since 2000. Like Health Care REIT, Ventas focuses on various health-care facilities, including specialty care and senior housing.
It has close to 1,500 properties; the majority are senior housing communities. Ventas is also very active when it comes to expanding its footprint.
Just last month, Ventas spent $2.6 billion to acquire American Realty Capital Healthcare
Trust. This added over 140 properties to its senior housing and medical office-building portfolio. Ventas also bought up 29 senior living communities from Holiday Retirement in Canada last quarter.
The beauty of Ventas is that it leases its health-care facilities under triple net leases. Under this scenario, tenants pay for taxes, insurance and maintenance of the properties, as well as rent. This provides the REIT with a predictable flow of revenues and cash flow.
About 50% of its net operating income is derived from triple net lease properties. The rest is generated via senior living operations and medical office buildings, 27% and 18% of net operating income, respectively. As well, Ventas only gets about 18% of revenues from government insurance programs; the rest is from private pay sources. With the uncertainty of Medicare and Medicaid, this is a big positive.
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The REIT industry remains a great place to invest for income, especially the health-care REIT space. In addition, unlike the office and retail REITs, the health-care REIT space is less volatile. Consumers will continue to spend money on health care regardless of the economic backdrop. The stocks above are two of the nation’s largest health-care facility REITs, each with market caps around $19 billion. These REITs are great places to help build wealth.

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