The Healthcare REIT That Pays You to Wait for Demographics

If you’re looking for a reliable corner of the economy to invest in, it’s hard to go wrong with senior housing. Baby boomers are the wealthiest generation in history, and every last one will be over 65 years old by 2030.

Heaps of wealthy baby boomers who can pay for senior housing without government assistance bode well for Welltower (WELL -0.89%), a leading real estate investment trust (REIT) in the senior housing space. A majority of revenue received by operators of its senior housing facilities comes from private pay sources, not Medicare or Medicaid.

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Welltower is growing profits by leaps and bounds

A lack of exposure to government payers allowed Welltower to record strong growth in both occupancy and rental rates in recent years. Net operating income from its senior housing segment shot up by 23.4% year over year during the second quarter.

Funds from operations (FFO), a proxy for earnings used to evaluate REITs, is expected to land in a range between $5.06 and $5.14 per share. The midpoint of the guided range implies a gain of 18% this year.

At recent prices, Welltower stock offers a measley 1.8% dividend yield, but the payout could rise quickly in the years ahead. The REIT raised its dividend payout by 10.5% earlier this year to an annualized $2.96 per share. With FFO expected to climb to $5.10 per share at the midpoint of management’s guided range for 2025, there’s still plenty of room to increase the quarterly payout further. Adding some shares to a diversified portfolio now and holding them over the long run could be a smart move for patient investors.