HCP’s business model promises healthy gains

At the end of 2013, health-care real estate in the United States was worth an estimated $1 trillion. With the population of those age 75 and older in the U.S., United Kingdom and Canada projected to increase 88 percent over the next 20 years, the size of this market is likely to grow substantially. Moreover, only 14 percent of that property is held by real estate investment trusts (REITs), which makes health-care real estate both a growing and underpenetrated market.

Investors looking to cash in should check out HCP (NYSE: HCP), which owns, manages, develops and leases more than 1,000 properties.Roughly a third of HCP’s business comes from one operating partner, HCR Manor Care, and California, Texas and Florida generated 41 percent of revenue at the end of 2013.

More diversification is preferable, but under its “5x5 investing strategy,” HCP is spreading its investments across five diversified health-care segments (senior housing, medical offices, life science buildings, nursing homes and hospitals) and five investment products.

As a REIT, HCP must pay out 90 percent of its earnings in dividends. The company recently yielded a tasty 5 percent, and it has been increasing its payout annually for 29 years. It takes a strong business and a disciplined approach to consistently pay and increase a dividend throughout several market cycles. It’s a solid portfolio contender, especially if you’re after dividend income.

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The folks at the Financial Industry Regulatory Authority (FINRA), meanwhile, offer useful comparisons via their Fund Analyzer tool (at finra.org/fundanalyzer).

My dumbest investment

My dumbest investment involved a small Canadian company seeking to mine the ocean floor for copper, gold, silver and more. I saw its potential as enormous, if it could pull it off. When the stock plunged due to delays and other issues, I bought in at $2 per share. I bought more as the stock fell further, ending up with an average cost per share near $1. With shares near $0.40 per share now, I’m underwater.

This was my dumbest investment because it was much too speculative from the start and because I continued “catching the falling knife” – buying more as the price fell. But the greatest reason it’s my dumbest investment is that I’m going to buy more. Perhaps there is an element of emotion in this decision. Perhaps it is the lure of sunken treasure. Perhaps there’s an element of pride in being unwilling to admit that I was wrong. It may be a dumb move, but I’m hoping to be lucky. – D.M., the Philippines

The Fool responds: This is an ultra-risky penny stock, with no revenue or earnings yet. You’re gambling more than investing here.