Updated on April 7th, 2025 by Nathan Parsh
The demographics of the United States are undergoing a seismic shift as Baby Boomers age. The Baby Boomers are a very large generational group, meaning the aging U.S. population is expected to result in higher demand for healthcare.
Many investors have expressed concern about how this will affect the economy. While some areas of the economy may feel pressure from this trend, one sector is almost certain to grow as a result: healthcare spending and healthcare Real Estate Investment Trusts (REITs for short).
LTC Properties (LTC) is poised to take advantage of this trend. As a premier owner-operator of healthcare properties, LTC is seeing the demand for its properties increase.
We believe LTC is an attractive investment for income investors. The stock has a high dividend yield of 6.8% and pays these dividends monthly. There are currently 76 monthly dividend stocks.
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While LTC Properties is poised to benefit from the aging population, that does not guarantee that the stock will be a strong performer moving forward; fundamental analysis is still required.
This article will analyze the investment prospects of LTC Properties in detail.
Business Overview
LTC Properties is a healthcare Real Estate Investment Trust that owns and operates skilled nursing facilities, assisted living facilities, and other healthcare properties. Its portfolio consists of approximately 50% assisted living and 50% skilled nursing properties. The REIT owns 190 investments in 25 states with 30 operating partners.
Source: Investor Presentation
Like other healthcare REITs, LTC benefits from a strong secular trend, namely the high growth of the population over 80. This growth results from the aging of the baby boomer’ generation and the steady rise of life expectancy thanks to sustained progress in medical sciences.
On February 24th, 2025,, LTC reported its financial results for the fourth quarter of fiscal 2024. Funds from operations (FFO) per share fell 8% compared to last year’s quarter, dropping from $0.72 to $0.66, and missed analysts’ expectations by $0.01. The decline in FFO per share was mainly due to impairment losses. Thanks to various asset sales, LTC improved its leverage ratio (Net Debt to EBITDA) from 4.7x to 4.3x.
The company is also facing challenges with deferred payments from some tenants. The bankruptcy of Senior Care Centers, which was the largest skilled nursing operator in Texas, in 2018 greatly reduced the REIT’s financials. Senior Care Centers was nearly 10% of annual revenue for LTC and was its fifth largest customer.
Despite the pandemic easing, LTC’s business momentum remains weak, leading to management’s statement that it cannot issue guidance for 2025. Instead, full-year guidance will be distributed at a later date.
Growth Prospects
As mentioned, LTC Properties will benefit from the secular tailwind of the aging population in the United States. As the Baby Boomers age, the demand for skilled nursing and assisted living properties will increase materially. This benefits LTC Properties in two main ways.
First, more demand for its properties means that LTC can purchase more properties and expand its asset base. If this can be done conservatively – without diluting the REIT’s unitholders – this will boost the trust’s per-share funds from operations.
Second, LTC Properties will have a tangential benefit since its tenants (healthcare operators) will experience a higher demand for their services. Since their services are in high demand, this reduces the probability of default on their leases and also reduces LTC Properties’ tenant vacancy.
This REIT has been investing heavily to take advantage of this trend. Since 2010, LTC has put more than $1.5 billion to work in new real estate investments.
Thanks to the favorable underlying fundamentals of the healthcare sector, LTC has grown its funds from operations at a mid-single-digit CAGR in the last decade. Moreover, the REIT has most of its assets in the states with the highest projected increases in the 80+ population cohort over the next decade. On the other hand, growth has stalled in the last four years, partly due to Senior Care’s bankruptcy.
In addition, the REIT had been affected by the pandemic. We continue to expect a 2.0% growth in funds from operations over the next five years.
Source: Investor Presentation
One positive working in the REIT’s favor is that its properties are spread out across the U.S., which provides some measure of geographic diversity.
Dividend Analysis
The company pays a very attractive dividend yield of 6.8%. The dividend is paid monthly at a rate of $0.19 per share. This dividend rate has not been changed since October 2016.
We expect the company to earn an FFO of $2.70 per share for 2025. This will represent an FFO dividend payout ratio of ~85%. This would be high if the company was a normal corporation. However, since the company is a REIT, it is required by law to pay out a large percentage of its earnings. It’s, therefore, not unusual for REITs to have elevated FFO payout ratios.
Since the company is expected to increase FFO by about 2% annually for the next five years, we think a dividend raise can come if this FFO growth plays out. Before 2017, the company had increased its dividends at an annual compound rate of 15.8% over 14 years. Since 2017, however, FFO has been flat and decreasing, but we expect that to change somewhat.
However, given its past growth track record, we do not see the company increasing its dividend in the near future. This stock is for investors who are looking for income right now.
Final Thoughts
LTC has many of the characteristics of a solid dividend investment. The company has a strong 6.8% dividend yield (more than four times the average dividend yield of the S&P 500) and is very shareholder-friendly, paying these dividends monthly.
The trust will also benefit immensely from the secular trend of aging domestic populations. While FFO growth has been hard to come by in recent years, the stock appears undervalued, and its high dividend yield will further boost shareholder returns.
With all this in mind, LTC Properties seems attractive to income investors looking for exposure to the healthcare REIT space.
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