The second top pick comes from JP Morgan, which has Primary Health Properties (LSE:PHP) in its sights. This unique real estate investment trust (REIT) landlord owns one of the largest portfolios of properties used by private healthcare professionals as well as the NHS. Think GP surgeries, pharmacies, dental clinics, etc.
With the bulk of its leases government-backed, the company’s long since enjoyed highly stable and predictable cash flows linked to inflation. And subsequently, management’s been able to deliver dividend hikes for more than 25 consecutive years.
Like many REITs, Primary Health Properties has seen its share price come under significant pressure in recent years. After all, higher interest rates don’t exactly create an ideal environment for landlords with lots of mortgage debt.
Nevertheless, given the nature of the firm’s clientele and the perceived strength of its cash flows, the analysts at JP Morgan have put their share price target at 114p. Compared to where the stock trades today, that’s a 17% potential capital gain paired with a tasty-looking 7.3% dividend yield.
However, there are still some crucial risks to consider.
Having the NHS as a primary tenant can be advantageous. But it also means that budget cuts and policy changes can be quite disruptive. It could even lead to lease agreements not being renewed. And since finding new tenants for specialised healthcare facilities isn’t easy, occupancy could come under pressure along with cash flows.
MotleyFool
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