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Analyst Blog

Ventas Inc. (VTR - Analyst Report), a real estate investment trust (REIT), has recently declared a quarterly dividend of 62 cents per share for the third quarter of 2012. The dividend marks a 38.1% increase compared to that in the year-earlier quarter. The common stock dividend is payable in cash on September 28, 2012 to shareholders of record at the close of business on September 11.

If the current dividend level is maintained for the remainder of the year, the annualized dividend payout of the company would be $2.48 per share. This would represent a healthy year-over-year dividend hike for Ventas with a 14.1% increase in dividend for full year 2012.

A steady dividend payout facilitates the long-term strategy of Ventas to provide attractive risk-adjusted returns to its stockholders. Investors looking for high dividend yields are increasingly favoring REITs like Ventas. Solid dividend payouts are arguably the biggest enticement for REIT investors as the U.S. law requires REITs to distribute 90% of their annual taxable income in the form of dividends to shareholders.

Ventas is one of the top performing healthcare REITs in the U.S., with one of the largest and most diversified portfolios in the healthcare sector with exposure to all types of facilities. The product diversity of the company allows it to capitalize on opportunities in different markets based on individual market dynamics, and provides a competitive advantage over its peers.

In addition, healthcare is relatively immune to the economic problems faced by office, retail and apartment companies. Consumers will continue to spend on healthcare while cutting out discretionary purchases. The healthcare industry is also the single largest industry in the U.S., based on Gross Domestic Product (GDP). All these factors offer stability to the company amidst volatility in the market and enable it to continue paying steady dividends.

We maintain our Neutral recommendation on Ventas, which has a Zacks #3 Rank that translates into a short-term Hold recommendation. We also have a Neutral recommendation and a Zacks #2 Rank (short-term Buy rating) for HCP Inc. (HCP - Analyst Report), one of the competitors of Ventas.

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