At the end of 2013, health care real estate in the U.S. was worth an estimated $1 trillion. With the population of those age 75 and older in the U.S., U.K., and Canada, projected to increase 88% over the next 20 years, the size of this market is likely to grow substantially. 

Moreover, only 14% of that property is held by real estate investment trusts, which makes health care real estate both a growing and under-penetrated market. For investors looking to cash in, HCP (NYSE:PEAK), and Health Care REIT (NYSE:WELL), own, manage, develop, and lease senior housing, medical offices, life science buildings, nursing homes, and hospitals.

Today, I'll dig into each companies' diversity, risk management, and track record as we look for the best dividend stock to cash in on the huge trend of American aging. 

A diversity of properties and investment approaches across a variety of geographic locations helps to keep income and dividend payments consistent. With more than 1,000 properties each, Health Care REIT and HCP meet at least part of this standard. 

Health Care REIT
Between the two, Health Care REIT is arguably the more diverse. No one operating partner -- a company that manages properties for Health Care REIT -- accounts for more than 14% of investments.The company is also geographically diverse with its most concentrated areas -- California, New Jersey, and England -- representing just 25% of investments. 

The company does, however, create 60% of its earnings from managing and renting senior housing. 

Unlike Health Care REIT, roughly a third of HCP's business comes from one operating partner, HCR Manor Care. Also, HCP is more geographically concentrated with California, Texas, and Florida representing 41% of revenue at the end of 2013.

Under its "5x5 investing strategy," HCP is less exposed to one specific type of real estate. Instead, the company will use a variety of investment approaches to more evenly spread its investments between several types of health care real estate. 

Ultimately, with a high number of properties spread across the U.S. and both working toward expanding their international exposure, Health Care REIT and HCP have enough diversity to protect themselves from a regional downturn or a few defaulting tenants.

As REITs, all three companies are required by law to pay out 90% of their earnings in dividends. This makes raising capital a top priority. However, if companies borrow too much they can find themselves in hot water.

The coverage ratio compares a company's earnings before interest, taxes, deprecation, and amortization, or EBITDA, to what it is paying in interest expenses. The higher the ratio, the more likely the company can cover its debt. 

HCP is in the strongest position. But, with a ratio above three, Health Care REIT should not have a problem covering debt. 

It takes a strong business and a disciplined approach to consistently pay and increase a dividend throughout several market cycles. 

HCN Dividend Chart

The plunge in Health Care REIT's dividend is a bit deceiving. The company paid a special dividend following its merger with Windrose Medical Properties Trust in late 2006. Combine the special dividend with the regular payment and Health Care REIT skated through the financial crisis unharmed. 

HCP is the only REIT that is a Dividend Aristocrat. This means the company has increased its dividend payments annually for at least 25 years. Moreover, since 1990, HCP's 194% dividend growth has far outpaced Health Care REIT's 84%. 

Bonus: value 
Dividend yield and price to funds from operations, or P/FFO, are two quick ways to gain a relative valuation. Dividend yield mirrors price, so when price goes down the yield goes up. Second, funds from operations is a REIT-specific metric that gives a better indication of true earnings. Similar to a price-to-earning ratio, the lower the number the cheaper the valuation. 

Valuation Metrics-2014
Company Price-to-FFO Dividend Yield
Health Care REIT 17.4 4.7%
HCP 14.4 5.1%

Source: Company filings and YCharts.

Health Care REIT and HCP's significant size and long tenure comes with durability and a wide range of relationships to enhance growth potential. This has shined through as Health Care REIT created five-year total return of 100% and HCP a return of 83%. 

I believe both companies are in a great position to take advantage of the growing health care real estate market. However, when it comes to dividend stocks it's hard to beat an Aristocrat. So, despite the weaker recent return, HCP is a stable business with a proven track record trading at a better price. For those reasons, I'm favoring HCP.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.