Investing money in dividend-paying stocks is an easy way to start generating passive income. Many companies pay dividends, which gives you lots of options.
One ideal option for those seeking to collect recurring passive income is Healthpeak Properties (NYSE: DOC). The real estate investment trust (REIT) recently switched to paying monthly dividends instead of the typical quarterly schedule, which better aligns the payment with your monthly expenses. It also offers a very attractive dividend yield currently above 7% (significantly higher than the S&P 500‘s sub-1.5% yield). A $1,000 investment would produce more than $70 of annual passive income at that rate. Here’s a closer look at this top-notch income stock.
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A very healthy payout
Healthpeak Properties owns a diversified portfolio of healthcare real estate. It invests in state-of-the-art lab campuses, outpatient medical buildings, and continuing care retirement communities. It focuses on owning high-quality buildings in prime locations because they benefit from growing demand.
The healthcare REIT‘s outpatient medical building portfolio provides it with stable and growing rental income. It signs five-to-seven-year leases that feature low-single-digit annual rent bumps with high-quality healthcare systems that need space near hospitals. Meanwhile, its purpose-built lab portfolio is in high demand by biopharma companies, which drives healthy rent growth as legacy leases expire. Finally, its high-quality senior housing properties appeal to active seniors, which drives longer stays and higher occupancy.
Healthpeak’s portfolio works together to deliver stable and growing rental income to support the REIT’s monthly dividend. It generated $1.60 per share of adjusted funds from operations (FFO) in 2024. That can easily cover its annual dividend outlay of $1.22 per share.
Healthy growth
Healthpeak has been growing its adjusted FFO briskly in recent years (19% over the past three years). Several factors are driving this growth.
A big growth catalyst was its 2023 merger with Physicians Realty Trust. The deal created a premier owner, operator, and developer of healthcare real estate. It has been steadily capturing synergies from that transaction ($50 million last year and another $15 million expected in 2025), which have helped boost its bottom line.
Healthpeak has also benefited from rent growth across its portfolio. Last year was a record year of leasing across its outpatient medical and lab portfolio. It signed new leases at much higher rates than expiring contracts (7% on average for outpatient and 11% for lab). It was also a record year of performance by its senior housing portfolio (21% same-store net operating income growth).
On top of that, the REIT is investing capital to grow its portfolio. It has spent money on several marquee lab development and redevelopment projects that have the potential to add more than $60 million to its bottom line in 2025 and beyond. It has also agreed to invest $161 million across several properties, including a preferred equity investment in a lab development project, a loan to develop a medical office building in Texas, and a loan to redevelop a lab building in California. Healthpeak also entered into a partnership with a company to develop residential housing as part of a mixed-use lab and residential area in Massachusetts.
Healthpeak has ample financial flexibility to continue making new investments. The company currently has about $500 million to $1 billion in capacity to make accretive new investments or repurchase its shares.
These growth drivers should enable the REIT to increase its high-yielding dividend. It recently bumped its payout up by 1.7%.
A top option for passive income
Healthpeak Properties’ high-quality portfolio of healthcare properties produces stable and growing rental income. That supports the REIT’s high-yielding monthly dividend. With built-in growth and ample investment capacity, Healthpeak should be able to increase its high-yielding payout in the future. That makes it a great option for those seeking to generate a healthy stream of passive income.
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Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool recommends Healthpeak Properties. The Motley Fool has a disclosure policy.
