Ventas, Inc. (NYSE:VTR) is up against a new 52-week high right now, with a 16% return year-to-date vs. a flat stock market. However, the biggest reason investors should like Ventas stock in 2016 isn’t the outperformance, but the stability.
With a 4.5% dividend yield at current pricing, VTR stock is tailor-made for this market and perfect for beating the day-to-day volatility.
Ventas, a healthcare-focused real estate investment trust, is the poster child for a low-risk investment.
For starters, as a REIT, VTR stock must deliver 90% of its taxable income back to shareholders in the form of big dividends. And right now, it’s paying 73 cents a quarter for a 4.5% dividend yield.
Also, the focus on healthcare properties provides a rock-solid revenue stream. Ventas is a pure play on the demographic shift in America driven by aging baby boomers who need more care as they age, as the REIT owns and operates properties including medical office space, hospitals and senior housing facilities.
These businesses not only have decent growth ahead of them thanks to the demographic trends at work in America, but also are recession-proof since consumers will cut back on just about everything else before they sacrifice their quality of life in that way.
The icing on the cake is that Ventas has many properties operating under so called “triple net” leases, where the tenants are responsible for operating expenses — including taxes, insurance and maintenance. That means more flexibility for VTR stock since it doesn’t have to worry as much about outlays, and can simply cash the rent checks each month.
Admittedly, Ventas is already very large, and the slow-growth nature of REITs may mean there aren’t many fireworks here.
But sentiment is strong as VTR stock is bumping around at a new 52-week high, and you can be sure investors will rely on this “risk-off” pick in a volatile market.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not hold a position in any of the aforementioned securities.
