Welltower Inc. WELL owns a diversified portfolio of healthcare real estate assets in the key markets of the United States, Canada and the U.K. The favorable senior housing industry, capital-recycling efforts and a healthy balance sheet are likely to continue aiding the company to ride the growth curve.

This Toledo, OH-based healthcare real estate investment trust (REIT) has gained 36.8% in the past six months compared with the industry’s 13.8% growth.

Analysts seem bullish on this Zacks Rank #2 (Buy) company. The Zacks Consensus Estimate for WELL’s 2024 FFO per share has moved marginally northward over the past two months to $4.19.

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Factors That Make Welltower a Solid Pick

Favorable SHO Portfolio Dynamics: Given an aging population and an expected rise in senior citizens’ healthcare expenditure, Welltower’s seniors’ housing operating portfolio is well-poised to capitalize on this positive trend. Muted new supply has also been a tailwind for this industry.

With a supply-demand imbalance, the portfolio is expected to experience sustained occupancy growth in 2024 and the coming years. Capitalizing on these positive aspects, Welltower’s SHO portfolio is well-prepared for compelling multiyear revenue growth. In 2024, management anticipates the same-store SHO NOI to grow within 19-23%, driven by favorable results and expectations for continued strength in the second half of 2024.

Favorable OM Visit Trend: There has been a favorable outpatient visits trend compared with in-patient admissions. Banking on this, the company is optimizing its outpatient medical (OM) portfolio, growing relationships with health system partners, and deploying capital in strategic acquisitions. From the beginning of 2024 through July 29, 2024, Welltower carried out pro-rata acquisitions and loan funding totaling $45.6 million for one OM property.

Given the favorable secular trends and growing need for value-based care, the company’s efforts to strengthen its OM footprint will boost long-term growth.

Capital-Recycling Efforts: WELL’s capital-recycling efforts to finance near-term investment and development opportunities highlight its prudent capital management practices and pave the way for long-term growth.

From the beginning of 2024 through July 29, 2024, the company completed pro-rata gross investments of $2.12 billion. This included $1.63 billion in acquisitions and loan funding and $492.7 million in development funding. During this period, pro rata property dispositions and loan payoffs totaled $685.5 million. As of June 30, 2024, eight SHO and one OM properties were classified as held for sale.

Balance Sheet & Cash Flow Strength: Welltower maintains a healthy balance sheet position and has $8.7 billion of available liquidity as of July 26, 2024. The company enjoys investment-grade credit ratings of BBB+ and Baa1 from S&P Global Ratings and Moody’s, respectively, rendering it access to the debt market at favorable rates.

With a well-laddered debt maturity schedule and enough financial flexibility, Welltower is likely to meet its near-term obligations and fund its development pipeline.

WELL’s current cash flow growth is projected at 20.65% compared with a decline of 4.03% estimated for the industry.

Other Stocks to Consider

Some other top-ranked stocks from the broader REIT sector are National Health Investors NHI and Alpine Income Property Trust PINE, each carrying a Zacks Rank #2 at present.

The Zacks Consensus Estimate for National Health Investors’ 2024 FFO per share is pegged at $4.55, which suggests year-over-year growth of 5.1%.

The Zacks Consensus Estimate for Alpine’s full-year FFO per share stands at $1.65, which indicates an increase of 12.2% from the year-ago period.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.

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