Ventas, Inc. (VTR): A High-Yield, High Quality Healthcare REIT

Over the coming decades, the aging of the U.S. population is going be one of the largest demographic and economic megatrends, creating potential investment opportunities for long-term dividend investors.

Let’s take a look to see if Ventas, Inc. (NYSE:VTR), America’s second largest medical Real Estate Investment Trust, or REIT, could be a sensible choice for low risk investors to ride the coming financial wave of growing medical spending.

Ventas stock has slumped nearly 20% over the last three months and offers a dividend yield near 5%, potentially providing an appealing entry point. Let’s take a closer look at the business for consideration in our Conservative Retirees dividend portfolio (1).

Business Description

Ventas is one of the two dominant players in medical real estate assets. After the 2015 spinoff of its skilled nursing facility, or SNF, properties into a separate REIT, Care Capital Properties Inc (NYSE:CCP), its business is dominated by 1,275 properties, mostly in the senior housing, medical office buildings, and hospital sectors.

As seen below, the company’s largest assets by net operating income (NOI) are seniors housing – operating (31%), seniors housing – NNN (24%), and medical office (19%). Ventas also has several large operators, with Atia, Lillibridge, Sunrise, and Kindred accounting for 19%, 11%, 9%, and 9% of NOI, respectively.

Source: Ventas Investor Presentation

Business Analysis

The medical REIT industry is over $1 trillion in size and highly fragmented, with only about 15% of U.S. medical assets owned by medical REITs. Compared to other industries, healthcare REITs control a relatively small percentage of real estate assets and should have opportunities for consolidation.

Source: Ventas Investor Presentation