Real Estate Investors Should Consider Owning SNH Stock
Dividend stocks and owning real estate both similarly provide monthly income from an investment, though real estate’s is received from the tenant(s) paying rent.
However, owning real estate tends to require a lot more effort than dividend stocks, given local regulations, the need to ensure that tenants respect your property, and maintenance. Personally, I value my time and would not want to drop everything to fix a tenant’s toilet.
However, there is an alternative method to invest in real estate without the extra hassle: real estate investment trusts (REITs). These involve investing in a company that owns and operates real estate on your behalf; investors simply receive an income for being part-owner of the business.
A great REIT to consider for income purposes is Senior Housing Properties Trust (NASDAQ:SNH). The name gives the business model away: the company owns and operates independent living, assisted living, and skilled nursing and wellness centers for accommodating people in their golden years.
I mention SNH stock because it is offering a current yield of 7.39%. And with a little stock price appreciation, it is possible to earn double-digit returns. Here are the benefits of owning SNH stock over a rental property.
Why Consider SNH Stock Over a Rental Property?
Senior Housing Properties’ portfolio contains more than 400 properties currently holding over 600 tenants in 18 different states across the U.S.
If you owned just one property, there is the possibility of having multiple tenants. This is notable because if one of the tenants happened to leave, it would negatively affect your cash flow. But since SNH stock is compromised of a large pool of tenants, just one tenant leaving will have no impact, not to mention that they won’t be able to just leave overnight.
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Also keep in mind that local laws are always changing. But with a REIT like SNH, this concern is minimal, since the properties are across different states.
Lastly, REITs are managed by professionals who make all the investment decisions. They prioritize investors receiving a steady income and added value to their capital. This is very important to consider before deploying capital into a rental property because not everyone has the mindset require to be a landowner.
How Would You Benefit By Owning SNH Stock?
Senior Housing Properties’ portfolio is geared towards accommodating the senior population. And with 10,000 baby boomers turning 65 every day, demand for senior housing currently exceeds supply. This means the costs of living arrangements for these seniors has risen to compensate, which benefits the company since it means there will also be more demand for the wellness centers and skilled nursing services. (Source: “Senior Housing Properties Trust REITWeek 2017: NAREIT’s Investor Forum June 2017,” Senior Housing Properties Trust, June 2017.)
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Shareholders could see a higher share price since more revenue would be reported as a result of the increased demand. Those at the company itself seem to be well aware of this and remain on the lookout for new assets that would benefit the business and investors alike. Growing the portfolio of assets is possible because of the financial flexibility that comes from having a strong balance sheet and is how capital gain is generated, in part due to a high dividend yield.
Earn a Reliable 7.39% Dividend Yield
The dividend income is received on a quarterly basis, typically paid out in February, May, August, and November.
The 7.39% dividend yield would result in generating $7,390 a year based on an investment of $100,000. On a quarterly basis, this would amount to receiving $1,847.50. And again, this is all without the effort required of a property owner.
This income also has the possibility of increasing over time because the dividend has a history of increases–something management isn’t shy about doing. There is diversification and future demand to look forward to as well.