Why Welltower (WELL) is a Solid Dividend Stock for the Next 20 Years


Welltower is an excellent example of a REIT. In short, REIT stands for real estate investment trust, which is a kind of business that leases out real estate properties so that the earnings can be paid to the shareholders in the form of dividends. It is important to note that different REITs can specialize in different kinds of real estate properties, which make them better-suited to certain investors under certain circumstances than others.

How Does Welltower Earn Its Revenues?

For those who are curious, Welltower specializes in health care infrastructure. To be exact, it specializes in three categories, which would be seniors housing, post-acute care, and outpatient medical. The first means housing that is meant for seniors, which includes independent living, assisted living, and memory communities. Meanwhile, the second means facilities that are meant to help their patients recover from illnesses as well as other issues, while the third means facilities that are meant to provide their patients with health care without needing them to head into a hospital. Combined, it is clear that Welltower has a very strong focus for its real estate properties, which tends to be regarded as a good thing by investors who are concerned about businesses being too spread out.

Otherwise, Welltower earns its revenues in much the same manner as other REITs. In short, it leases out its real estate properties to its clients on a long-term basis. In exchange, it can expect reliable revenue streams on a long-term basis, thus making it an excellent choice for someone who is seeking stability when it comes to their investment portfolios.

Why Is Welltower a Good Choice for Dividend Investors?

Examining Welltower’s long-term prospects means examining long-term trends in the U.S. population. In short, the United States is like other developed countries in that it has seen a huge decline in fertility rates, so much so that the fertility rate in 2017 was 1,765.5 births per 1,000 women in 2017. For context, this is below the 2,100 births per 1,000 women that a population needs to remain constant, which is higher than 2,000 births per 1,000 women because of mortality. On the whole, the United States is actually luckier than a lot of developed countries in that it is a very attractive place for people to immigrate to, which when combined with other potential solutions such as increased automation as well as keeping people in the workforce at more advanced ages, should enable the United States to mitigate the worst of the potential issues. Something that some developed countries such as, say, Japan can’t claim.

In any case, the important part for an examination of Welltower’s future prospects is that the U.S. population is expected to age in the near future. In fact, it is expected to age so much that the number of seniors is expected to become higher than the number of children in the decades to come, which is a very interesting reversal from the previous state of things that will send ripples traveling throughout the whole of U.S. society. For instance, the higher number of seniors means that businesses will offer more and more products and services aimed at seniors because there will be bigger and bigger bases of potential customers waiting for them.

Due to Welltower’s chosen specialization, it is already prepared to profit from the expected surge in potential customers in the times to come. After all, seniors face particular challenges that their younger counterparts do not, meaning that there is a need for senior-oriented communities that can let them retain their independence while still providing them with various forms of support. For that matter, even if seniors retain their full capabilities, independent living communities can still offer them a whole host of amenities to make their lives that much more convenient and thus that much more pleasing. As such, it isn’t difficult to see how Welltower’s seniors housing will benefit from the continuing surge in the number of seniors.

As for the various health care facilities that make up the rest of Welltower’s real estate portfolio, it is important to note that seniors spend a great deal on health care, thus creating further demand for health care facilities. There are various reasons for this phenomenon. For example, seniors tend to be in poorer health, meaning that they tend to need more healthcare. Likewise, health care is better than ever before, meaning that there are now more health care options that interested individuals can pay for. Whatever the exact combination of causes, the part that matters is that more seniors mean more interest in health care, which in turn, means more profit-making potential for health care facilities.

Further Considerations

Of course, it is important to note that there is much more nuance to Welltower’s real estate portfolio than a focus on seniors housing as well as seniors-oriented health care facilities. For example, the REIT is very focused on private pay options, so much so that these make up something like 95 percent of its portfolio. Likewise, the REIT has a greater interest in high-barrier markets when it comes to seniors housing, with an excellent example being Manhattan. Naturally, these factors have an impact on the suitability of the REIT’s shares for interested individuals, meaning that the latter will want to look into them to get a better understanding of whether Welltower is right for them or not.

With that said, most factors suggest that Welltower will be a reliable dividend stock in the times to come. After all, it has chosen to specialize in a sector that is expected to boom because of trends that are pretty much guaranteed to happen. Moreover, the REIT has made strategic choices that make its revenues even more reliable than otherwise possible, which further strengthens that conclusion.

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