As an income investor, I’m always looking for companies likely to raise dividends sooner rather than later. Right now, I see good potential for dividend growth in a small corner of the REIT (real estate investment trust) universe — health care REITs.

These REITS, which invest in hospitals, rehabilitation facilities and senior retirement centers, delivered a 69% increase in dividend payouts in 2010 — the largest in the industry, according to SNL Financial data. Even better, health care REITs are expected to repeat this performance by again producing the highest REIT dividend payout in the first half of this year, according to Bloomberg data.

#-ad_banner-#Health care REITs are poised to grow dividends because of more than $11 billion of industry acquisitions last year. During the real estate meltdown, these REITs were able to acquire properties at bargain prices from private sellers and grow their stream of rental income. As REIT income rises, dividends go up, since these companies are required by law to distribute the majority of their income to shareholders as dividends.

An added benefit is that health care REITs are likely to sustain this growth momentum going forward since an aging U.S. population will demand more health services in coming years. Health care is already America’s single largest industry based on GDP. In addition, health care REITs generally perform well during downturns because consumers tend to spend money on medical needs while cutting discretionary purchases.

There are several choices for investors in this space. Here are four high-yielding healthcare REITs likely to increase dividends in the future.

1. Senior Housing Properties Trust (NYSE: SNH)
Yield: 6%

Senior Housing Properties Trust invests in hospitals, nursing homes, senior apartments and assisted living properties. The REIT owns 327 properties in 37 states. Since the beginning of 2011, Senior Housing has acquired or agreed to acquire another 33 properties worth more than $450 million.

Unlike other REITs that cut payouts during the recent downturn, Senior Housing was able to continue growing dividends. Payout rose in each of the last three years and a key REIT income metric — Funds from Operations (FFO) has more than covered dividend payments. Senior Housing hiked the dividend this year to a $1.48 annualized rate, which boosted the dividend yield to a recent 6.3%.

2. HCP Inc. (NYSE: HCP)
Yield: 5%

HCP is the nation’s largest medical REIT, with 672 properties extending across 42 states and Mexico. Last year, HCP acquired 338 skilled nursing and assisted living facilities from HCR ManorCare in a deal valued at $6.1 billion. The acquired properties, located in premium markets, should provide a secure source of income growth.
HCP has increased dividends eight years in a row, to a $1.92 annual rate in 2011. Management expects this year’s FFO to range between $2.62 and $2.68 per share, which leaves plenty of room for dividend growth. At present, HCP shares yield 5.2%.

3. Health Care REIT (NYSE: HCN)
Yield: 6%

Health Care REIT owns senior living communities, medical offices and outpatient medical centers. In April, the REIT paid $2.4 billion to acquire 147 skilled nursing and assisted living communities in the Northeast and Mid-Atlantic states. Once all planned-for 2011 acquisitions and developments are completed, the company will own 880 properties and more than $13 billion in assets.

During the recession, Health Care REIT managed to avoid dividend cuts despite a high payout ratio (89% of FFO in 2010). Historically, dividend hikes have been modest at around 2% a year, but most analysts expect the growth rate will accelerate in the future due to changes in the REIT’s property mix — the result of more acquisitions and a larger book of development projects. Dividends grew 5% in this year’s March quarter to a $2.88 annualized rate, which increased Healthcare REIT’s yield to a recent 5.6%.

4. Sabra Health Care REIT (Nasdaq: SBRA)
Forward Yield: 8%

This REIT, a recent spin-off of Sun Healthcare (Nasdaq: SUNHD), was given most of Sun’s properties, which include 86 nursing homes, assisted living communities and rehabilitation centers across 19 states. Sun continues to lease these facilities under triple net leases (i.e. the tenant pays insurance, maintenance and taxes) with 10 to 15-year terms.

During the March quarter, Sabra completed its first two acquisitions, which were together valued at $68 million. An announced third acquisition will close in June. Sabra plans to further diversify by geography, property type and tenant, and it has $65 million in cash and a $100 million credit line to finance future growth. 

The REIT’s dividend payout was high at 91% of FFO during the March quarter, but with Sabra’s liquidity, coverage should improve as more acquisitions are made and rent income expands. Since Sabra is a small company, it will likely grow at a faster pace than more established REITs like HCP and Healthcare REIT. In the meantime, Sabra’s $1.28 annualized dividend delivers a generous 7.7% yield.

5. Medical Properties Trust (NYSE: MPW)
Yield: 7%

This REIT owns 58 health care properties that it leases to 19 hospital group tenants. In the past 12 months, Medical Properties has acquired $475 million of new hospital assets and the company expects to complete at least $100 million of additional acquisitions during the remainder of 2011.

The REIT was paying a $0.27 quarterly dividend, but it cut the payout to $0.20 during the real estate meltdown. Management targets a rise in FFO to between $0.92 and $0.96 per share once planned acquisitions are completed, which would make a dividend hike likely. A note of caution, however, is that the Medicare billing practices of the REIT’s largest tenant are under investigation, which increases risk. Still, Medical Properties offers an attractive 6.8% yield based on the current $0.80 annual dividend.

Action to take–> Conservative income investors should like HCP and Health care REIT. These steady-eddies are safe bets on reliable dividend growth. More aggressive investors should take a closer look at Sabra and Medical Properties, which are more risky but offer significantly bigger yields.

P.S. — If you’re looking for quality stocks with high yields, you should take a look at this one. It pays a 19.2% dividend yield. It borrows cheap, gets paid handsomely and then pockets the spread. You’ll get the full story on this cash machine and others like it in this video.