A few years ago, there was reason to be concerned with the dividend at Income Investor selection Health Care REIT (NYSE:HCN). But the performance of this real estate investment trust is gradually alleviating those worries, leaving some room for optimism.

The company's second-quarter results, released last night, show that earnings remain on track. Funds from operations (FFO) increased by 6% to $0.74 per share, up from $0.70 per share last year. The company's alternative metric of funds available for distribution, which takes into account the differences in straight-line rent revenue recognition, improved by 10% to $0.75 per share. With the dividend sitting at $0.64 per share, the FFO- and FAD-based payout ratios are now 86% and 85%. Both are improvements over last year's 89% and 91%, respectively.

The above FAD number needs to be adjusted slightly for recurring capital expenditures and prepaid rent receipts, but the dividend appears to be well-covered, and there's reason to believe that continued growth can lead to small increases without much danger.

This REIT won't grow rapidly, but the company did raise its guidance slightly on funds available for distribution, up $0.04 per share to a range of $2.95 to $3.03 for the year. The company also maintained its FFO guidance. On the balance sheet, its debt as a percentage of total market capitalization declined to 37%, and the company is repositioning its portfolio for future growth through acquisitions and development.

The argument for a long-term investment in Health Care REIT is that the company is well-positioned to capitalize on the wave of baby boomers who will require assisted living and skilled nursing facilities in future years. I don't doubt that this is true, but companies such as Ventas (NYSE:VTR), Health Care Property Investors (NYSE:HCP), and Senior Housing Properties Trust (NYSE:SNH) are also pursuing the same customers in the same business. All could do well, but separating which companies have the most attractive properties and attractive locations to offer customers will determine who gets most of the spoils.

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At the time of publication, Nathan Parmelee owned shares in Health Care REIT, but had no interest in any of the other companies mentioned. The Motley Fool has an ironclad disclosure policy.