Welltower Inc (NYSE:HCN): The Best Real Estate Play for the Next 50 Years?
HCN Stock: Income Investment with Huge Upside Potential
We’ve all heard of someone getting rich from real estate. However, most of these stories involved an investor owning some land or properties to begin with. And those things aren’t cheap. Today, I’m going to show you a real estate investment that is accessible to even the smallest retail investors. There is no need to get a mortgage, and the upside could be huge.
Regular readers of Income Investors would know that I’m referring to real estate investment trusts, or REITs. Created in the 1960s, REITs gave an opportunity for regular Americans to invest in large-scale, diversified portfolios of real estate assets. Today, there are more than 1,000 REITs in the U.S. Among those, more than 200 trade on major stock exchanges. All you need is a phone call to your broker and you will instantly be collecting rental income from one of the dividend-paying REITs.
Of course, not all REITs are the same. Some specialize in retail properties, while others invests in apartments, office buildings, or industrial warehouses. With so many to choose from, which real estate stock should income investors own?
Well, the REIT I’m about to show you not only pays a rock-solid dividend, but also has huge growth potential in the decades to come.
I’m talking about Welltower Inc (NYSE:HCN), a Toledo, Ohio-based REIT that specializes in healthcare properties.
To be more specific, Welltower’s invests primarily in seniors housing properties, post-acute care facilities, and outpatient medical buildings. By the end of the second quarter, the company’s portfolio consisted of 1,384 total healthcare properties. These properties house around 192,000 residents and receive approximately 16-million outpatient medical visits every year. (Source: “The Aging Population: Driving the Future of Health Care Real Estate,” Welltower Inc, last accessed September 28, 2017.)
The reason why Welltower deserves investors’ attention today lies in a major demographic trend: population aging. The U.S. Census Bureau projects that the number of Americans aged 65 and over willd almost double by 2050. In particular, the 85+ population would double in just two decades. (Source: Ibid.)
As people get older, healthcare spending typically increases. National health expenditure data suggests that Americans between age 45 and 64 spend on average $8,400 a year on personal health care. The amount rises to $15,900 for those between age 65 and 84, and further increases to $34,800 for population aged 85 and over.
Aging Population Drives Healthcare Spending
“The Aging Population: Driving the Future of Health Care Real Estate,” Welltower Inc, last accessed September 28, 2017.
Reasons behind higher healthcare spending for senior citizens include more frequent doctor/hospital visits and more staying at rehabilitation centers and senior homes. In other words, properties in Welltower’s portfolio could get a lot more visits and stays as more people enter their golden years. And that could significantly boost the company’s revenue stream in the next few decades.
Here’s the best part: unlike speculative real estate projects, there is not much risk when you invest with Welltower. The company is investment-grade rated by Moody’s, Standard & Poor’s, and Fitch, and is also a member of the S&P 500 Index.
Furthermore, investors don’t have to wait for a future payday, because Welltower pays generous dividends. With its quarterly dividend rate of $0.87 per share, HCN stock currently yields five percent. Considering that the average S&P 500 company yields less than two percent at the moment, investors purchasing Welltower stock today can lock in a yield more than twice the benchmark’s average.
I’m sure there are more exciting opportunities in the stock market, but when it comes to offering both current income and future growth potential, this real estate stock is hard to beat.