September 26, 2011 at 06:00 AM EDT
Senior Housing REITs Offer Great Dividends, Big Growth
Burgeoning baby boomer population should boost Senior Housing Properties Trust and other elder care stocks.

Stats from the Centers for Disease Control and Prevention and the Administration on Aging offer some rather startling demographic trends about our aging baby boomer population. By 2030, the number of people older than 65 is expected to increase to almost 20% of the total population. The 85-plus demographic will increase from a tally of 4.2 million in 2000 to 6.6 million in 2020.

In short, Americans are living much longer, and older citizens are becoming an increasingly large portion of our population.

Senior Housing Properties Trust (NYSE:SNH) is cashing in on this trend, with more than 220 senior living properties in the U.S. and about 27,500 living units nationwide. The company is looking to the future simply by expanding — including the purchase of nine additional properties this month for $314 million. The company is soundly profitable and has seen revenue jump from $188 million in fiscal 2007 to a projected $450 million in fiscal 2011 — a 140% increase in four years.

Mind you, Senior Housing Properties Trust isn’t exactly an innovator. It is just positioning itself for an inevitable demographic shift. But it’s a powerful trend investors can’t ignore.

Long-term investors would do well to tap into this trend now. Real estate prices are depressed, long-term loan rates are low and now is a good period for companies like this to expand.

What’s more, these elder care stocks typically are Real Estate Income Trusts in designation, or REITs (pronounced reets) for short. This is a tax designation for a company that demands it gives back 90% of income to shareholders — meaning a mandate for big dividends that only will get bigger as the company grows.

SNH is just one stock in the sector. Other elder care stocks are out there, but with a dividend of more than 6%, SNH is the best income player in the space. Also, other larger stocks like Ventas (NYSE:VTR) or Health Care REIT, Inc. (NYSE:HCN) are involved with third-party leasing, medical centers, office buildings and other business facilities outside the focus on elder care.

I happen to like SNH above its peers, but its competitors also could be worth a look for long-term potential. The dividend power of these REITs can’t be matched, and the demographics are in their favor.

Jeff Reeves is the editor of InvestorPlace.com. As of this writing, he did not own a position in any of the stocks named here. Follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook.


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