Healthcare Realty Trust (HR)

Next up is a real estate investment trust, a REIT. These companies, which buy, own, operate, and lease a wide range of real properties and mortgage assets, are well-known as perennial dividend champions. Healthcare Realty Trust, which specializes in medical office space, is a solid representative of the niche. The company completed a major merger action, with Healthcare Trust of America on July 20.

Including assets gained in the merger, the company boasts a portfolio made up of 728 properties totaling well over 44 million square feet of leasable space. Of this total space, 82% is set up as multi-tenant leasing. The company operates in 35 states. Healthcare realty also provides leasing and property management services for more than 39 million square feet of medical space nationwide.

Looking at financial results, HR reported a net income of $28.3 million in 3Q22. This came to an EPS of 8 cents per share, well above the 1-cent expected. For the third quarter, the company realized a normalized funds from operations (FFO) of $129.4 million, or 39 cents per diluted share. That was below consensus estimates of $0.43.

The FFO is important to dividend investors, as this is the metric that funds the payment. HR declared a dividend of 31 cents per common share with its 3Q22 results, and paid it out on November 30. At the current payment, the dividend annualizes to $1.24 and gives a yield of 6.1%.

Steve Cohen has showed that he’s impressed by the attributes of HR, and he’s done so with a large buy. His firm picked up 800,200 shares of HR, setting up an initial position that’s now worth $16.24 million.

Stephen Manaker, 5-star analyst from Stifel, takes a balanced view of this REIT, weighing the positives and negatives before coming down firmly on the bullish side – giving his belief that the company’s growth potential is real and that the downside is more a slower pace to that growth rather than a pullback.

“We have concerns about how long it will take HR to integrate the HTA portfolio, and then capitalize on the combined portfolio’s leasing opportunities. At this point, it remains a ‘prove it’ story on the earning side. However, we remain Buy rated because we believe the current valuations are very attractive on our 2023 estimate, which we believe represent a ‘realistic scenario’,” Manaker opined.

Quantifying his stance, Manaker rates Healthcare Realty a Buy and puts a $25 price target, implying a 23% upside for the coming year.

Looking at the consensus breakdown, 2 Buys and 1 Hold add up to a Moderate Buy analyst consensus. Shares in HR are trading for $20.30, and the average price target of $25 suggests a 23% upside from that level by the end of next year.