Better Buy: HCP, Inc. vs. Senior Housing Properties Trust
That's the backstory for healthcare real estate investment trusts, or REITs, like 5.6% yielding HCP, Inc.(NYSE: HCP) and 8.3% yielding Senior Housing Properties Trust(NASDAQ: SNH). Since REITs are a dividend-focused asset class, you might be tempted to buy the healthcare REIT with the highest yield, but don't make that mistake. That's something of a mixed bag right now, because overbuilding has left a supply overhang in the senior housing space (which should be absorbed over time as baby boomers age), while medical office and medical research assets are in relatively high demand right now. HCP's senior housing business makes up around 40% of its portfolio compared to 50% for Senior Housing. And medical office and research assets are about 50% of HCP's portfolio but around 40% of Senior Housing's mix. Having slightly more exposure to the relatively weak senior housing sector is only the top level of this comparison. When you dig a little bit deeper into these two REITs' senior housing portfolios, a key difference quickly comes to the surface.