Welltower is an excellent example of a REIT. In a nutshell, REIT stands for real estate investment trust, that is a kind of business that leases out properties so that the earnings can be paid towards 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 particular investors under certain circumstances than others.
How Does Welltower Earn Its Revenues?
For those who are curious, Welltower specializes in health care infrastructure. To become exact, it specializes in three categories, which may be seniors housing, post-acute care, and outpatient medical. The very first means housing that is intended 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 should provide their patients with healthcare without needing them to head into a medical facility. Combined, it is clear that Welltower includes a very strong focus for its properties, which tends to be regarded as a good thing by investors who are worried about businesses being too disseminate.
Otherwise, Welltower earns its revenues in much the same manner as other REITs. In short, it leases out its properties to its clients on a long-term basis. As a swap, 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 a nutshell, the United States is like other developed countries in that it has seen an enormous decline in fertility rates, so much so that the fertility rate in 2021 was 1,765.5 births per 1,000 women in 2021. For context, this really is below the 2,100 births per 1,000 women that a population needs to remain constant, that 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 coupled with other potential solutions for example increased automation as well as keeping individuals the workforce at more advanced ages, should enable the Usa to mitigate the worst of the potential issues. Something that some civilized world 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. human 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 within the decades to come, which is a very interesting reversal from the previous state of products 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 in the future. After all, seniors face particular challenges their younger counterparts do not, and therefore there is a need for senior-oriented communities that may let them retain their independence while still going for 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 create their lives that much more convenient and thus that much more pleasing. As such, it isn’t hard to see how Welltower’s seniors housing will benefit from the continuing surge in the amount of seniors.
As for the various healthcare facilities that make up the rest of Welltower’s property portfolio, it is important to note that seniors spend a good deal on health care, thus creating further interest in 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, healthcare 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 means something is that more seniors mean more interest in health care, which in turn, means more profit-making possibility of health care facilities.
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 in addition to seniors-oriented health care facilities. For example, the REIT is very focused on private pay options, so much in fact that these make up something like 95 % 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 4 elements 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 suits them or not.
With that said, most factors claim that Welltower will be a reliable dividend stock in the times to come. After all, it has chosen to specialize in a sector that's expected to boom because of trends that are pretty much guaranteed to happen. Moreover, the REIT has made strategic choices that make its revenues much more reliable than otherwise possible, which further strengthens that conclusion.