Earlier today, the U.S. Federal Reserve announced plans to hold interest rates in place for the foreseeable future.
This year, the U.S. central bank slashed interest rates three times to provide support for the economy. However, falling rates are a dagger for income investors who may be living off fixed income or simply don’t want to expose themselves to the frothy equity markets.
At Money Morning, we’re always looking for cash-churning investments that provide share price upside and strong dividends – especially in a low-interest-rate environment.
If you’re looking for a way to tap into high-growth industries, earn mouthwatering dividends, exploit tax-friendly investments, and reduce your downside – look no further than real estate investment trusts (REITS).
Our top REIT for 2020 could climb to five times its current price, and shares yield a solid 7.9%. Click here to get the best REIT to buy for 2020…
Today, I’m going to unpack the top REIT tapping into one of the biggest demographic and economic trends in the U.S. economy.
You see, the ongoing boom for medical housing and the rising demand for real estate from the medical and life science industries has one healthcare REIT set up for mouthwatering returns…
It pays a 4.4% dividend and could easily see its unit price increase by 51% over the next year.
Let’s get started.
This REIT Will “Peak” in 2020
Healthpeak Properties Inc. (NYSE: PEAK) is one of the premier healthcare-related REITs on the market.
Healthpeak owns and develops high-quality real estate in three private-pay healthcare sectors: life sciences, senior housing, and medical offices. And the company has been actively expanding its portfolio with $2.5 billion worth of acquisitions this year.
PEAK has also had a great deal of success filling the properties. Year to date, it has executed over 1.2 million square feet of leases, including 390,000 square feet in the third quarter.
In the most recent transaction, the firm amended and extended a lease with biotech leader Amgen at its Britannia Oyster Point campus in the San Francisco area. The lease covers 684,000 square feet in seven buildings of the life sciences center. The amendment provides Amgen the ability to continue its occupancy at three of its currently leased buildings through 2029.
Healthpeak is well positioned to benefit from the aging population here in the United States.
The company has actively been disposing of properties in lower-growth markets and focusing on cities where the population of seniors is growing faster than the national average.
PEAK owns 27,000 senior living units across the country. These communities provide independent living, assisted living, and memory care in attractive markets that will see a sharp increase in demand. That’s because more baby boomers are about to start crossing the 80-year-old threshold (when most senior care residents enter a facility).
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The life sciences portfolio owns properties containing laboratory and office space primarily for biotechnology, medical device and pharmaceutical companies, scientific research institutions, government agencies, and other organizations involved in the life science industry.
That portfolio is concentrated on areas that have a strong biotech presence, including San Francisco and San Diego, California; Boston, Massachusetts; and Durham, North Carolina. Healthpeak owns 133 properties on 27 campuses, and the portfolio is currently over 97% leased.
The firm also has a portfolio of medical office buildings that include physicians’ offices, labs, diagnostic centers, rehabilitation clinics, and day-surgery operating rooms. Most of these buildings are located on the campus of a leading local hospital and are affiliated with that hospital system. Best of all, this portfolio is currently 92% leased.
Healthpeak is well positioned to benefit from the aging population and medical breakthroughs from the biotechnology sector. The REIT is in excellent financial shape, carrying an investment grade rating from all three major rating agencies.
Now Is the Time to Buy PEAK
With PEAK’s current dividend yield of 4.33%, you can earn more than double the 10-year U.S. Treasury note while you wait for the powerful demographic tailwinds to push the value of the properties higher over the next couple years.
Healthpeak has one of the top investment theses for 2020 and beyond. Strong demand for both senior housing and medical office and development space will outpace economic growth in the years ahead.
But there’s one more metric that investors should explore before buying PEAK shares. This quantitative factor is perhaps the single best signal that PEAK shares are set to explode in the year ahead.
I’m talking about the Money Morning Stock VQScore™. And Healthpeak has a top VQScore of 4.9.
That means earnings per share is rising – and is expected to continue rising while demand for the underlying stock increases.
Right now, PEAK units trade for $33.
However, given the positive momentum of the REIT market and the solid fundamentals, I project that PEAK could hit $50 by the end of 2020.
That price target represents nearly 51% upside from Tuesday’s closing price.
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Source: Money Morning