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Senior Housing Properties Trust(SNH - Get Report) is a $3.25 billion health care REIT that owns more than 300 senior care facilities and medical offices spread throughout most of the U.S. From a long-term standpoint, the trust is well positioned -- as the average age in the U.S. increases dramatically, demand for senior housing facilities is expected to increase in kind. That means that SNH should be able to find organic growth easily going forward.
As a REIT, Senior Housing is essentially an instrument that's designed to generate income for investors. That's contrary to many investors' assumptions that REITs are good ways to get exposure to the value of real estate. They're not. Instead, financial arrangements like long-term, triple-net leases mean that SNH gets paid a predetermined lease rate with built-in inflation increases, and tenants worry about property taxes, maintenance, and everything else.
The result is a firm that's doesn't necessarily track real estate values (because it's only exposed to them when it's re-leasing properties) -- but instead pays out a sizable distribution to shareholders. Last week, management announced a 2.7% increase in its payout, bringing it to 38 cents per share. That's a 7.17% yield at current levels.
This name is a solid core holding for income investors right now.
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