Why Healthpeak Properties (DOC) is a Contrarian Gem in a Slump: Valuation, Dividends, and Hidden Growth

Healthpeak Properties (DOC) has been a poster child for underperformance in recent years, with its stock lagging the S&P 500 by wide margins over multi-year horizons. Yet beneath the surface, the company's fundamentals—bolstered by a strategic pivot to high-growth life sciences and medical office assets, a fortress balance sheet, and a generous dividend—suggest a compelling contrarian opportunity. The market's myopic focus on near-term headwinds has left DOC trading at a valuation discount that defies its operational strength. Here's why investors should take note.

The Contrarian Case: Why the Sell-Off is Overdone

The stock's recent underperformance is stark. Over the past five years, DOC has returned just 13.5%, versus the S&P 500's 99% surge. Even over the past year, it's up a mere 5.7%—far behind the broader market. Yet this underperformance has created a rare mispricing. Let's break down the key catalysts the market is missing:

1. A Portfolio Shift to High-Growth Sectors

Healthpeak is no longer your grandfather's medical office REIT. The company has methodically pivoted toward life sciences and specialized healthcare properties—sectors that are booming amid rising demand for biotech labs, outpatient care, and drug development facilities. As of Q1 2025, 75% of its portfolio is now in life sciences and outpatient medical assets, which command premium lease rates and lower vacancy risks.

For instance, its Q1 2025 results highlighted +5% cash releasing spreads for outpatient medical leases and +7.7% for lab leases—a stark contrast to the stagnant returns of traditional office spaces. The Cambridge Point partnership with Hines, a $1.2 billion mixed-use life sciences project in Boston's tech corridor, further underscores its focus on high-growth niches.

2. Strong Fundamentals Amid Volatility

Despite macroeconomic headwinds, Healthpeak's operational metrics are robust. Q1 2025 AFFO per share came in at $0.43, up slightly from the prior year, while same-store NOI grew 7.0% year-over-year. This outperformance is driven by contractual rent increases and minimal tenant turnover in its specialized portfolios.

Even more telling: the company's $2.8 billion liquidity (including $1.1 billion in cash) and a 5.2x net debt/EBITDA ratio offer a buffer against rising interest rates—a critical advantage in today's uncertain environment.

3. A Dividend Machine at a Discount

With a 7.1% dividend yield, DOC is a standout in the REIT sector, especially as rates rise. The payout is well-covered by AFFO, and the company has reaffirmed its commitment to returning capital to shareholders via dividends and buybacks. Over the past year, it spent $94 million on share repurchases, signaling confidence in its valuation.

Valuation: The Market's Oversight

The stock's current price-to-FFO ratio of 9.4x is roughly half its five-year average and far below peers like Omega Healthcare Investors (OHI) at 14.2x. Even more striking: the consensus price target of $21.67—a 28% premium to current levels—remains unachieved, despite the company's track record of outperforming lease-up expectations.

Analysts, while cautious, are gradually warming to the story. Recent upgrades from Evercore ISI (to $25) and Bank of America (to “Buy”) reflect a recognition that DOC's life sciences focus is undervalued. Meanwhile, the stock's trailing P/FFO is 22% below its five-year average, suggesting mean reversion could drive a rebound.

The Contrarian Play: Risks and Rewards

The primary risks include delayed leasing in a sluggish economy and competition from newer life sciences-focused REITs. However, Healthpeak's scale and existing tenant relationships mitigate these concerns.

The reward? A stock trading at a 34% discount to its five-year average price target ($32.50) and offering a 7% dividend yield—with upside to $25+ if analysts' targets are met. For contrarians, this is a rare chance to buy a well-managed REIT at a deep discount to intrinsic value.

Investment Thesis

Healthpeak Properties is a classic contrarian opportunity: a misunderstood company with solid fundamentals, a strategic edge in high-growth sectors, and a valuation that ignores its strengths. While short-term volatility remains, the combination of high yield, sector leadership, and undiscounted growth catalysts makes DOC a compelling buy at current levels.

Actionable Takeaway: Accumulate DOC on dips below $18, with a 12-month price target of $22–$25. Pair it with a stop-loss below $16 to manage risk.

Backtest the performance of Healthpeak Properties (DOC) when 'buy condition' is triggered on quarterly earnings announcement days, and 'hold for 30 trading days' after each earnings release, from 2020 to 2025.

In a market obsessed with the next hot sector, Healthpeak's slump has created a rare opening to profit from a mispriced gem.