Death and taxes are the only two certainties in life, and we try like the devil to dodge them both. Because of this, HCP can pay its investors a healthy 5.3% dividend.

HCP (NYSE: HCP) is a real estate investment trust, or REIT, that owns or holds interests in $22 billion worth of properties, including 20 hospitals, 444 senior housing properties, 302 nursing facilities, 115 properties occupied by biotechnology and pharmaceutical companies, and more than 270 medical offices.

To say these are prosperous times for health-related companies, especially those involved in senior housing, is an understatement. HCP has built its portfolio through property development, entering into joint ventures and offering project financing to health care companies to build their own facilities.

Growing Population

Since 1980, the percentage of people older than 65 in the U.S. has risen from about 6% to about 13%. By the end of the next decade, seniors will account for nearly 20% of all Americans. Largely because of the aging population, health care is now the single-largest industry in the U.S., at 18.3% of gross domestic product. Health care spending is expected to grow 6.1% this year and 5.8% in 2015. Annual compounded growth is expected to reach an average of 6.2% between 2015 and 2022.

HCP uses many strategies to keep its costs down and income flowing. For example, HCP’s leases make tenants responsible for paying property maintenance and insurance, and stipulate that rents increase at the rate of inflation. The leases typically run for 12 to 15 years, and most of them have about 10 years remaining.

HCP also uses master leases, which group a number of properties together under a single lease to a single tenant. This prevents a tenant from simply abandoning a property where business is bad. Since a master lease is typically renewed on an all-or-nothing basis, the tenant has little choice but to keep the properties under the lease occupied.

Thanks to such arrangements, less than half of HCP’s existing leases will expire between now and 2021, and most of those that are expiring will be renewed because the tenants would have to pay high costs to relocate to other properties.

HCP also has been taking advantage of the REIT Investment Diversification and Empowerment Act (RIDEA), which became law in 2008. RIDEA allows REITs greater leeway in how they conduct their business. Before the law, REITs were essentially limited to being passive landlords that simply collected rents. Under RIDEA, however, a REIT can also own a stake in an operator of properties and share in its profits (and losses).

RIDEA arrangements still make up just 10% of HCP’s net operating income, but it recently inked a massive RIDEA deal with Brookdale Senior Living. The contract covers 14 new senior-living campuses valued at $1.2 billion, with HCP owning 49% and Brookdale owning 51%. Another RIDEA joint venture between the two groups gives HCP 80% ownership and Brookdale 20%. As a result of the deal, analysts forecast that the REIT’s earnings will grow 1% this year and 4% in 2015.

HCP’s portfolio of properties is a cash cow, generating $1.7 billion in income annually. Quarterly revenues have risen by a factor of five, to $536.1 million over the past decade, and operating income has doubled to $208.2 million.

That growth has helped fund steady dividend increases for 29 years, making HCP the only REIT on the Standard & Poor’s 500-stock index Dividend Aristocrats list, which tracks companies that have increased their dividends for at least 25 consecutive years.

A Taxing Advantage

But let’s not forget the other certainty in life: taxes. The fact that REITs enjoy a tax advantage is another reason HCP can afford to be so generous with its dividend. It doesn’t pay any income tax itself, as long as it pays out at least 90% of its taxable income to shareholders.

The REIT’s investors also get a bit of a tax break themselves because of the makeup of the distributions. For example, of a total distribution of $2.10 per share last year, about $1.81 was taxable ordinary income, about 15 cents was capital gains (these sometimes qualify for a lower tax rate), and about 14 cents was a nontaxable distribution. The 1099 you receive at the end of the year will give you a breakdown of the tax treatment. While the breaks for investors aren’t nearly as generous as those received by the REIT, every little bit helps.

Operating in a high-demand market using smart tactics, HCP should continue to offer high levels of income and its shares should continue to appreciate. Buy HCP up to $44.