Healthpeak Properties' Q3 Dividends: A Steady Hand in a Rising Rate Environment

Healthpeak Properties (NYSE: DOC), a leading healthcare real estate investment trust (REIT), has announced its third-quarter 2025 dividend schedule, maintaining a monthly payout of $0.10167 per common share, totaling $0.305 per share for the quarter and an annualized yield of 6.35%. This consistency in dividends amid a challenging real estate landscape raises critical questions: How sustainable are these payouts as interest rates rise? Can Healthpeak's focus on healthcare assets shield it from broader sector headwinds?

Dividend Structure and Current Yield

Healthpeak's Q3 dividends are structured as three monthly payments:
- July 31: Payable to shareholders of record on July 18.
- August 29: Payable to shareholders of record on August 18.
- September 30: Payable to shareholders of record on September 19.

The annualized dividend of $1.22 per share places Healthpeak's yield comfortably above the broader market, with the S&P 500 yielding around 1.5%. For income-focused investors, this is an attractive proposition, but sustainability hinges on underlying financial health.

Financial Resilience: FFO Growth and Debt Management

To assess dividend sustainability, we turn to Funds from Operations (FFO), the primary metric for REITs. Analysts project Healthpeak's Q2 2025 FFO at $0.46 per share, a 2.2% increase from Q2 2024, reflecting steady performance. Full-year 2025 FFO is expected to reach $1.85 per share, with 2026 guidance at $1.94 per share—a 4.9% annual growth rate.

Debt metrics also paint a manageable picture:
- Total debt: $8.85 billion as of 2024, up from $7.08 billion in 2023, reflecting growth through acquisitions.
- Debt-to-EBITDA ratio: 5.75x (trailing 12 months), slightly elevated but within REIT norms.
- FFO payout ratio: 66%, well below the 85% threshold many analysts consider risky.

The low payout ratio underscores dividend safety, even as net income dipped in 2024 due to merger-related costs. For REITs, FFO—not net income—is the true measure of cash-generating capacity.

Navigating Rising Rates: Healthcare's Defensive Edge

The Federal Reserve's prolonged tightening cycle has pressured REITs, as higher borrowing costs squeeze margins and reduce investor demand for high-yield stocks. However, Healthpeak's focus on healthcare real estate—a sector with high tenant demand and inflation-linked leases—acts as a counterweight:

• Diverse portfolio: 70% of properties are in life sciences, outpatient medical facilities, and continuing care retirement communities (CCRCs), which saw 7.7% same-store NOI growth in Q1 2025.
• Tenant retention: 86–88% retention rates across lab and medical spaces, with rental increases of 4–5%, reflect strong demand.
• Strategic partnerships: Collaborations like the Cambridge Point development with Hines target high-barrier-to-entry markets, enhancing long-term cash flows.

Risks and Considerations

While Healthpeak's healthcare focus is a strength, risks persist:
1. Interest rate sensitivity: The 5.75x debt-to-EBITDA ratio could strain cash flows if rates rise further.
2. Sector competition: Overbuilding in life sciences and multifamily sectors may pressure occupancy.
3. Balance sheet flexibility: The $2.8 billion liquidity buffer (cash + undrawn credit) offers a cushion, but investors should monitor debt refinancing needs.

What to Watch in Q2 Earnings

Healthpeak's upcoming July 25 earnings call will provide key updates:
- Same-store NOI performance, especially in lab and CCRC segments.
- Leasing velocity: Executing the 400,000 sq. ft. in letters of intent will be critical to sustaining revenue growth.
- Debt metrics: Any changes in net debt/EBITDA or refinancing plans.

Investment Thesis and Conclusion

Healthpeak's 6.35% dividend yield is compelling for income investors, but its sustainability depends on execution in three areas:
1. Maintaining FFO growth through disciplined capital allocation and portfolio optimization.
2. Navigating rising rates without compromising liquidity or tenant retention.
3. Outperforming peers in sectors like life sciences, which are less cyclical than traditional office or retail real estate.

Recommendation: Healthpeak's defensive healthcare exposure and manageable leverage make it a Hold for income investors. However, aggressive buyers might consider a Buy if Q2 results confirm margin resilience and leasing momentum. Avoid the stock if rising rates trigger a broader REIT sell-off or if occupancy metrics weaken.

In a sector fraught with risks, Healthpeak's focus on healthcare's structural demand provides a steady hand—a rare commodity in today's market.