Dividend yields on these healthcare REITs average at least 5%. The real estate investment trusts (REITs) Doctors Realty Trust (DOC -0.06%) and Global Medical REIT (GMRE -0.55%) offer a desirable mix of revenue growth and dividend yields above 5%. Despite these factors, both REITs are currently under pressure.
When interest rates rose sharply over the past year, investors’ attitudes about REITs shifted negatively. Increases in the cost of borrowing money make it more challenging for real estate investment trusts to execute large property purchases or undertake large construction projects. They also increase the appeal of bonds and other high-yield assets that investors could look at as an alternative.
I believe the stocks of these firms are cheap due to their financial soundness and the recession-resistant quality of healthcare companies, especially if the rate of interest rate hikes continues to decline. For the reasons stated here, the following two dividend stocks merit long-term investment.
Physicians Realty Trust (NYSE : DOC)
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Physicians Realty is a healthcare real estate company that owns a variety of different types of buildings, including general medical practises, specialty hospitals, ambulatory surgical centres, and rehabilitation clinics. The vast majority of the company’s holdings are situated on medical campuses that also house hospitals and related medical establishments. Among the 290 properties owned by the corporation, 122 are medical office buildings with a single tenant, and 115 are medical office buildings with several tenants. Tenants and, by extension, Physicians Realty profit from the growing demand for outpatient medical services.
As of the end of the third quarter, the firm reported that 94.9 percent of its properties were occupied. Nine-month sales came in at $394 million, up 15.3% year over year, with NFFO at $188.5 million, up 5%. Normalized FFO increased to $61.4 million from $58.1 million in the same period of 2021, while sales increased 14.1% to $131.5 million.
Price drops of over 10% in the last year have been offset by gains of over 7% in 2023 for physicians’ stocks. The dividend yield for this company’s quarterly payout of $0.23 per share is almost 5.9%. A payout ratio of 85% for the NFFO indicates that it is well funded.
Global Medical REIT (NYSE: GMRE)
Global Medical specialises in leasing medical offices to healthcare systems and physician organizations. The corporation held 189 buildings and had 269 tenants as of the end of the third quarter. Over the past three years, Global has experienced robust growth in revenue and operating cash flow.
The occupancy rate in the portfolio is 96.8%, and the average lease period left is 6.40 years. In comparison to other REITs, its 79% fixed-to-total-debt ratio is rather low. The firm focuses on leasing out medical office space in secondary markets, where there is less competition and more opportunity for healthcare businesses.
Global’s AFFO was $51.5 million through the first nine months of the fiscal year, an increase of 14.4% year over year. This equates to AFFO per share of $0.74, up from $0.71 at the same time last year. Revenue increased by 18% year over year to total $101 million for the company.
Over the previous year, Global Medical’s stock has dropped more than 31%, but it has risen more than 16% in 2023.
With a yield of roughly 7.5%, Global’s dividend is more than four times the payout offered by the S&P 500 Index (which is 1.74%). The dividend was increased by 2% last year to $0.21 per share. The 84% AFFO payout ratio for dividends guarantees that Global will be able to continue paying its dividends without incurring any financial difficulty.
Why exactly are these two REITs good choices for a long-term investment?
Since healthcare spending is projected to increase over time as the population ages, both businesses stand to gain. Medicare and Medicaid Services (CMS) predict that by 2028, the healthcare industry in the United States will be worth $6.2 trillion, growing at a CAGR of 5.4%.
Despite the fact that the share prices of both of these healthcare REITS have increased this year, 2023 is still a great time to invest in them because of their strong dividend yields. Stocks with high dividend yields encourage long-term investment since shareholders receive income even as they wait for their investment to grow in value.