When I was a kid, I took a martial arts class for a year or two. It wasn’t particularly structured, and I think it was just my mom’s way of burning off my energy in a controlled environment to prevent me from destroying the house.
Based on the amount of patched drywall in the house where I grew up, it didn’t work very well.
I honestly don’t remember much from those classes. But one thing I do recall is the concept of “aikido,” a Japanese martial arts style that involves using your opponent’s movements and momentum to your own advantage.
There’s a certain elegance to aikido, and a core philosophy behind it that’s worth remembering in other areas of life—including investing.
Consider all the negative trends coming at us right now, including the risk of hyperinflation as well as the general “risk off” environment weighing down old favorites on Wall Street.
You can rage against this assault. Or you can just drop into a fetal position and cry about it.
But you can also use the momentum of the market, harnessing the power of these trends and using them to your advantage.
Sounds impossible? Keep reading and you’ll see just how it’s done with one of my favorite healthcare plays—National Health Investors, Inc. (NHI), a REIT that yields 6.2%!
A Recession-Resistant REIT Riding Three Powerful Trends
National Health Investors is a real estate investment trust (REIT), but unlike some bloated healthcare REITs it doesn’t own an overleveraged portfolio or decaying rural hospitals. Instead, NHI specializes in a finance-driven approach to healthcare real estate.
We’re talking sale-leaseback arrangements, where it buys a property then immediately leases it back to the prior owner, or “mezzanine” financing that is a kind of hybrid investment that provides better yield than traditional debt but a bit more reliability than pure equity investments. These tools allow it to gain a diversified exposure to the sector with a portfolio of more than 230 properties right now that include assisted living communities, skilled nursing facilities, medical office buildings and specialty hospitals.
This approach allows NHI stock to capitalize on three big trends that may be causing headaches for other investors:
Inflation – As rents soar, the leasing arm of this REIT will naturally reap better returns. Historically, commercial real estate has provided a hedge against inflation – and while the “work from home” revolution has challenged that notion when it comes to offices, healthcare is a very notable exception to that recent trend.
“Risk off” sentiment – There are fewer sectors more resilient in a tough market than healthcare, as patients need treatment in any economic environment. And of all the flavors of healthcare, there’s nothing more reliable than treatment for aging, infirm seniors.
Rising rates – While some finance-related REITs have to continue to binge on debt even as interest rates drive up the cost of borrowing, NHI has been proactive by trimming underperforming assets to pay down its liabilities. As proof, its total debt dropped from $1.5 billion in 2020 to $1.24 billion as of the end of 2021—a more than 17% decline.
For these reasons, among others, NHI stock has managed to gain 2.4% even as the broader market has imploded in 2022. It has shown particular strength recently, too, tacking on about 7% in the last 30 days.
National Health Investors also offers a generous yield fueled by reliable revenue that few other dividend stocks can match. NHI is plotting funds from operations of as much as $4.42 per share this fiscal year – which more than covers the current payout of $3.60 annually.
What’s more, that payout is good for a 6.2% yield at current pricing.
— Jeff Reeves
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It’s easy to get caught up in the gloomy headlines and red numbers scrolling across ticker feeds right now. But if you want to be a successful investor, you have to stop and think rationally about your long-term retirement goals.
At Contrarian Outlook, we’re not just contrarian for the heck of it. What we advocate is a different way of looking at the world, which can offer outsized gains in non-traditional investments – and in rough markets like this one, keep you grounded and prevent you from making mistakes.
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Source: Contrarian Outlook