Zacks_Analysts' Blog : LTC Properties Hikes Dividend - Analyst Blog

LTC Properties Inc. (LTC), a healthcare real estate investment trust (REIT), has recently increased its monthly dividend for first quarter 2012 by about 3.6% compared to the last dividend payout in the previous months of the earlier quarter. The common stock dividend of 14.5 cents per share per month is payable on the last working day of each of the respective month in the quarter.

A steady dividend payout facilitates the long-term strategy of LTC Properties to provide attractive risk-adjusted returns to its stockholders. Investors looking for high dividend yields are increasingly favoring REITs like LTC Properties. 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.

LTC Properties primarily invests in long-term care and other healthcare-related properties through mortgage loans, property lease transactions, and other investments. The company usually leases its healthcare facilities under "triple net" leases, under which the tenant pays all taxes, insurance, and maintenance for the properties, in addition to rent. This insulates the company from short-term market swings that may adversely affect the operations of a particular facility, and provides a relatively steady source of income.

Healthcare is also 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 the single largest industry in the U.S. based on Gross Domestic Product (GDP), and an aging Baby Boomer generation’s demand for assisted and independent living facilities should increase in the coming years.

Consequently, healthcare REITs like LTC Properties are well poised to benefit from the long-term positive dynamics of the industry. We presently have a ‘Neutral’ recommendation on LTC Properties, which currently has a Zacks #3 Rank that translates into a short-term ‘Hold’ rating. We also have a ‘Neutral’ recommendation and a Zacks #3 Rank for Health Care REIT Inc. (HCN), one of the competitors of LTC Properties.