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The World's Biggest Business Can Pay for Your Retirement

By Rob Fannon, editor Phase 1 Investor
Friday, January 9, 2009

One of the biggest problems for today's income investors is the downturn in real estate. And the biggest cloud over the real estate market is the crisis in commercial real estate...
 
Commercial property values have fallen as much as 20% since the credit crunch began. And publicly traded landlords – known as real estate investment trusts (REITs) – are suffering. Most of the major commercial REIT indexes dropped about 50% last year.
 
In general, investors should be steering clear of REITs altogether... with one exception. REITs that focus exclusively on medical property, which I call "health care trusts," are the best place to look for retirement income today.
 
Unlike most commercial real estate landlords, health care trusts have their future practically guaranteed by the U.S. government. Let me explain...
 
Last year, medical spending expanded faster than the overall economy, wages, and every other cost-of-living benchmark... again. The U.S. spent $2.2 trillion on health care in 2007 – more than $7,000 per person. It's the world's biggest business. What you might not realize is 50% of this money comes straight from the government, making Uncle Sam health care trusts' top client.
 
And the government is doing everything it can to make things easy for health care trusts and their shareholders. You see, in order to ensure adequate access to medical care, the government prohibited builders from cherry-picking the wealthiest zip codes for new medical businesses... and created significant barriers to entry in the medical real estate market. So established health care REITs enjoy monopoly-like conditions.
 
Also, because health care trusts are technically REITs, they get huge tax breaks from the government. In exchange, they pay out 90% of their income to shareholders through regular cash distributions.
 
The majority of America's hospitals, medical office buildings, retirement communities, and nursing homes are owned by just a dozen health care trusts. These tenants continue to pay rent through even the toughest economic downturns...
1. Medical office buildings, or "MOBs," include administrative offices, rehab facilities, outpatient facilities, dentist offices, substance-abuse treatment centers, and so on. 

2. Hospitals collect much of their revenue from government-sponsored health care programs, like Medicare and Medicaid.

3. Long-term care facilities range from community-based independent living to intensive skilled nursing facilities. With more than 40% of Americans over 60 years old, demand will steadily increase. 

4. Research and development spaces include the facilities and campuses of large pharmaceutical and biotech companies, as well as the massive number of smaller, start-up life-science companies.
So health care trusts continue to have a strong demand for their services and government-backed revenues... but the stocks were crushed with the rest of the REIT sector in 2008. That's driven their dividend yields through the roof.
 
Today, with annual payouts 8% and 10% and solid growth rates for years to come, I can think of no better place for income-seeking investors. Buy a handful and collect growing dividend checks every month.
 
Good investing,
 
Rob Fannon




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Market Watch
Symbol Price
Change
52-Wk
S&P 500 1224.71 +0.3% +11.4%
Oil 38.31 +1.4% -0.6%
Gold 138.07 +2.1% +16.3%
Silver 28.60 +2.4% +53.6%
US-Dollar 80.19 -0.6% +7.2%
Euro 1.34 +1.4% -11.0%
Volatility 18.01 -7.1% -19.8%
Gold Stocks 581.56 +3.0% +17.0%
10-Year Yield 3.02 +0.7% -10.7%

World ETFs
Symbol Price
Change
52-Wk
USA 122.89 +0.3% +11.3%
Canada 30.50 +0.2% +16.2%
Russia 21.94 +1.4% +18.1%
India 37.85 +0.3% +22.3%
Israel 16.69 +1.3% +10.8%
Japan 10.64 +0.6% +6.5%
Singapore 13.73 -1.1% +18.8%
Taiwan 14.78 +0.4% +19.2%
S. Korea 57.31 +1.3% +23.4%
S. Africa 71.87 +1.4% +28.2%
China 44.42 -1.4% -0.6%
Lat.America 53.17 +0.7% +8.4%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 137.59 +1.0% +18.9%
Big Pharma 64.14 +0.0% -3.2%
Internet 72.07 -0.1% +23.4%
Semis 16.22 +1.2% +29.4%
Utilities 31.28 +0.2% +1.5%
Defense 18.52 +0.1% +10.6%
Nanotech 10.03 +0.4% +1.6%
Alt. Energy 10.08 +1.3% -3.3%
Water 18.49 +1.0% +14.5%
Insurance 16.14 +0.4% +21.1%
Biotech 20.54 -0.2% +28.1%
Retail 19.70 +0.3% +30.2%
Software 24.79 +0.8% +25.9%
Big Tech 53.87 +0.3% +22.7%
Construction 13.10 +0.9% +15.7%
Media 13.64 +0.5% +26.0%
Consumer Svcs 67.39 +0.2% +24.5%
Financials 55.04 +0.3% +7.4%
Health Care 64.30 +0.1% +2.0%
Industrials 63.54 +0.5% +21.0%
Basic Mat 74.35 +1.1% +25.3%
Real Estate 55.32 +0.1% +25.0%
Transportation 91.77 +0.7% +26.9%
Telecom 22.59 +0.5% +17.8%