{"id":71609,"date":"2015-04-27T05:05:08","date_gmt":"2015-04-27T09:05:08","guid":{"rendered":"http:\/\/countingpips.com\/?p=71609"},"modified":"2015-04-27T07:37:27","modified_gmt":"2015-04-27T11:37:27","slug":"aging-population-should-power-this-reit","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2015\/04\/aging-population-should-power-this-reit\/","title":{"rendered":"Aging Population Should Power This REIT"},"content":{"rendered":"
April 27, 2015<\/div>
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By WallStreetDaily.com<\/u><\/a> \"Ventas,<\/p>\n

By Chris Worthington<\/a>, Editor-in-Chief of Income<\/em><\/p>\n

A famous proverb, often attributed to Benjamin Franklin, states that nothing in life is certain but death and taxes<\/a>.<\/p>\n

And while that may be true, it hasn\u2019t stopped humankind from working to delay each person\u2019s final moments as long as possible. The result, of course, is that more and more people are living to advanced ages.<\/p>\n

Meanwhile, the Baby Boomers \u2013\u00a0the largest generation in American history until recently \u2013\u00a0are joining the 65 and older population in great numbers.<\/p>\n

The portion of the U.S. population over age 65 is 17.5% today\u2026 and that number is expected to rise substantially in the next 30 years. In fact, by 2045, slightly more than a quarter of all Americans will have entered that demographic.<\/p>

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That\u2019s a powerful trend\u2026 and one company in particular has made several shrewd moves in April that should help it outperform going forward.<\/p>\n

Addition by Subtraction<\/h2>\n

Ventas, Inc.<\/strong> (VTR<\/a>) is a healthcare real estate investment trust (REIT) with a diversified portfolio of over 1,600 seniors housing and healthcare properties in the United States, Canada, and the United Kingdom.<\/p>\n

It\u2019s an intriguing company that has outperformed both the S&P 500 and the MSCI US REIT Index<\/strong> (RMZ<\/a>) for more than a decade while providing compound annual dividend growth of 9% \u2013 not to mention that its current dividend yield is a very nice 4.33%.<\/p>\n

And recently, on April 6, Ventas announced two moves that should provide a significant step toward continued outperformance.<\/p>\n

By mid-year, Ventas will close a deal to acquire Ardent Health Services, a for-profit hospital company whose network includes 12 acute care hospitals, a rehabilitation hospital, three multi-specialty physician groups, and retail pharmacies.<\/p>\n

Ventas ultimately plans to separate the hospital operations from the real estate and sell the operations portion of the business back to Ardent Management. Ventas will maintain a 9.9% stake in the new entity, but otherwise, it\u2019ll simply own the property and collect rent.<\/p>\n

In conjunction with the Ardent deal, Ventas also plans to spin off its post-acute care\/skilled nursing facilities into a new publicly traded REIT, Care Capital Properties, Inc.<\/strong>\u00a0(CCP). The new company, which will be one of just two pure-play, publicly traded skilled nursing facility REITS, will own and operate 355 nursing homes across the country.<\/p>\n

Initially, investors were thrilled by the moves, and Ventas stock shot up 5%. However, it has given up those gains in the weeks since\u2026 and that\u2019s good news for patient investors, who now have a chance to buy VTR at a better price and hold it for the long term.<\/p>\n

Deft Maneuvers<\/h2>\n

Indeed, Ventas looks well-positioned to capitalize on the enormous aging population trend \u2013 as well as some helpful changes courtesy of Obamacare.<\/p>\n

For instance, the Affordable Care Act is making hospitals much more profitable at the moment, which bodes well for the Ardent acquisition. Estimates from the Department of Health and Human Services show that the costs for treating the uninsured fell by $7.4 billion in 2014, which represents a 21% decrease from what costs could\u2019ve been if they\u2019d stayed at 2013 levels. As the number of uninsured continues to shrink, hospitals should continue to see their profits grow.<\/p>\n

Meanwhile, the Medicare Payment Advisory Commission has recommended a\u00a03.25%\u00a0increase in Medicare rates for acute-care services for FY 2016, which should provide some relief to hospitals who are often left with reimbursements that don\u2019t cover the cost of care provided.<\/p>\n

Plus, Ventas has been actively moving toward private-pay sources for some time now in order to avoid the pitfalls of insufficient reimbursement. According to its website, the company now derives approximately 76% of its net operating income (NOI) from such sources, which is a great sign for future growth.<\/p>\n

What\u2019s Not to Like?<\/h2>\n

Of course, being well-positioned is irrelevant if the company is expensive. Luckily, Ardent appears reasonably valued right now.<\/p>\n

Its 2015 estimated price-to-funds from operation (P\/FFO) is 15.5x, which is in line with other healthcare REITs and is below its own 10-year average. VTR is also the cheapest U.S. REIT, with a market cap of $20 billion or more right now \u2013 though, the other REITs in that group span a variety of disparate industries.<\/p>\n

As far as growth, Ventas has posted an extremely impressive five-year annual revenue growth rate of 27.21%. And Friday\u2019s earnings report, which featured a plethora of good news, also showed that Ventas is a healthy business. The company beat analysts\u2019 estimates for the fourth time in five quarters and reported solid growth: The total seniors housing operating portfolio NOI of $148.6 million represents a 21% increase, and same-store cash NOI growth for the total portfolio was 3.2%.<\/p>\n

Bottom line: Ventas appears well-positioned to capitalize on a powerful trend \u2013 the aging U.S. population. Indeed, there\u2019s no reason to think Ventas won\u2019t continue to outperform going forward, and investors will be paid handsomely in the short term just for holding shares of this attractive REIT.<\/p>\n

Good investing,<\/p>\n

Chris Worthington<\/p>\n\n\n\n
Editor\u2019s Note:<\/strong>\u00a0Former NYMEX insider Lee Lowell just revealed an explosive loophole inside the options market. He claims ordinary investors can exploit it to (legally) divert thousands of dollars from other people\u2019s accounts into their own. In fact, he anticipates between $12,292 and $18,438 is at stake for investors \u2013 every year \u2013 thanks to this loophole. For instant access, go here now<\/span><\/a>.<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

The post Aging Population Should Power This REIT<\/a> appeared first on Wall Street Daily<\/a>.<\/p>\n

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By WallStreetDaily.com By Chris Worthington, Editor-in-Chief of Income A famous proverb, often attributed to Benjamin Franklin, states that nothing in life is certain but death and taxes. And while that may be true, it hasn\u2019t stopped humankind from working to delay each person\u2019s final moments as long as possible. The result, of course, is that […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-71609","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/71609","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=71609"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/71609\/revisions"}],"predecessor-version":[{"id":71626,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/71609\/revisions\/71626"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=71609"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=71609"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=71609"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}