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Welltower: A Healthcare REIT Poised to Grow amid Macro Headwinds


Jul. 14 2017, Published 2:55 p.m. ET

Present condition of the healthcare REIT space

Given the aging population around the globe, healthcare infrastructure faces the major challenge of providing premium healthcare services to satisfy increasing demand.

With a surge in the number of chronically ill patients who require long-term care facilities, healthcare is in dire need of the proper infrastructure to look after old and sick people.

Amid uncertainty surrounding the repeal of Obamacare and the future policies of President Donald Trump, investors are jittery about investing in the sector right now.

However, things are different for Welltower (HCN). With its excellently-managed personnel, the company works closely with highly proficient tenants and operators in order to provide efficient services.

HCN ensures its profitability and leading market share via strategic initiatives such as positioning its properties in markets with high barriers to entry in which there’s also significant income growth.

Additionally, HCN has a high dividend yield, and it consistently increases its capital returns to its shareholders. Given its lucrative position, the stock surely deserves a closer look.

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Strong business momentum

HCN has been able to maintain its business momentum for the past few years on the back of higher operating efficiency and strategic initiatives of disposition and expansion. Welltower reported adjusted FFO (funds from operations) rises of 22.5%, 8.4%, 6.1%, and 3.9%, respectively, in 2013, 2014, 2015, and 2016. Welltower has also surpassed analysts’ estimates in the past few years.

Welltower’s close competitors include California-based HCP (HCP), Arizona-based Healthcare Trust of America (HTA), and Illinois-based Ventas (VTR).

The Vanguard REIT ETF (VNQ) holds almost 9% in Welltower, HCP, Ventas, and Healthcare Trust of America. VNQ has a market cap–weighted index with a broad product portfolio, which covers industries such as healthcare, self-storage, and residential REITs (real estate investment trust).

In the next article, we’ll see how the company maintains its bottom line growth.


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