Earlier this week I interviewed Scott Peters, the CEO of Healthcare Trust of America
What do I mean by pure-play? Simply said, HTA invests in just one product type -- medical office buildings -- and that necessity-driven sub-sector is perhaps one of the most defensively risk-aligned categories today.
HTA broke through the $12.00 mark a few weeks ago (all-time high was $12.21 on March 15) and since that time the stock has been hanging above the $11.40 to $11.60 range. The dividend yield today is just less than 5% (4.95%) with a P/FFO of 17.6.
Around ten months ago, I was the first to recommend HTA on The Street (see my article here) and since that time shares have climbed more than 16% -- add on the 5% dividend yield and you get a total return of more than 21%.
Now the institutions are getting wind of the new kid in town. Most investors have heard of the S&P 500 and the Dow Jones Industrials. These are examples of funds that invest in companies based on a broad-based index rather than individual stock fundamentals.
As a REIT gets bigger (or added to an index) investors must increase their investment in these companies. Interestingly, many active investment advisors are measured against these indexes and view a company's inclusion as a signal to pay attention to them.
That's exactly what's happening now with Healthcare Trust of America and in June HTA will unlock more shares (from its previous non-listed REIT shareholder pool) and I suspect that the investment appeal will increase. We're already seeing that now...
When Healthcare Trust of America went public in June, it was not owned by any institution or included in any index, limiting its investment appeal.
That has changed significantly since. Last fall, HTA's stock was added to several REIT indexes -- notably the MSCI US REIT Index and the Wilshire Real Estate Index. Institutional shareholders have also taken note, and increased their overall ownership stake in the company.
Healthcare Trust of America volume is averaging around one million shares a day and that should continue as the company is expected to be added to several more indexes over the next year which should further increase investor demand.
Healthcare Trust of America should continue to be a top performer in 2013 driven by the continued demand in high-quality income and strong capital appreciation. The stock is trading at $11.61 a share with a 4.95% dividend yield. My target price is $13.50.
At the time of publication the author held no positions in any of the stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
- 5 Top Cars at the New York Auto Show
- 10 Ways to Cut the Cost of Airfare
- Your House Is For Sale, You Just Don't Know it Yet
- Investment & Company Information