REITs: Healthcare Or Office? One Performs Better In A Recession (Both Tout Yields Over 5%)

From data gathered on Sept. 30, 2019, healthcare real estate investment trusts (REITs) have earned a trailing ten-year return of 11.6% on average.

Office REITs, however, tend to have an average ten-year return of 9%.

S&P Global reported that healthcare REITs have a five-year average dividend yield of 5.2%, while office REITs hold an average dividend yield of 2.9%.

See Also: 3 Mortgage REITs With Yields Of Over 13% And Trading For Far Less Than They're Worth

With a global recession looming, a volatile technology sector leading the way in layoffs — Meta Platforms META cut at least 11,000 employees — and employees still reluctant to return to the office since the Covid-19 pandemic started, office REITs may face harsher headwinds in the next few years.

Therefore, healthcare REITs may be the better investment, as the need for hospitals and skilled nursing services grows, especially after the Covid-19 pandemic.

Here are two REITs touting better-than-average yields:

• CareTrust REIT Inc. CTRE offers a dividend yield of 5.81% or $1.10 per share annually, making quarterly payments, with a notable track record of increasing its dividends for seven consecutive years. This REIT, engaged in the development and leasing of healthcare-related properties (skilled nursing and senior housing) has expanded its tenant roster to 18 operators. As of Sept. 30, CareTrust REIT has grown its real estate portfolio to 198 net-leased healthcare properties across 21 states. That's more than 21,500 operating beds. This excludes 19 properties classified as held for sale, two facilities that are in the process of being repurposed and two that are non-operational, as well as three secured loans receivable and two mezzanine loans receivable.
• Kilroy Realty Corporation KRC offers a dividend yield of 5.27% or $2.16 per share annually, conducting quarterly payments, with a decent track record of increasing its dividends for six consecutive years. Kilroy Realty primarily operates in California, Texas, and Washington. It manages over 14 million square feet in its portfolio which is in a wide range of industries, including technology, media, life science, entertainment, and professional services. Kilroy’s stabilized portfolio totaled approximately 16.2 million square feet of office and life science space which was 90.8% occupied and 92.6% leased. The company also had more than 1,000 residential units in Hollywood and San Diego, which had a quarterly average occupancy of 93.5%, as of Sept. 30, 2022.

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