WELL - Welltower: Trades At A Premium But For Good Reason

2024-06-20 10:24:53 ET

Summary

• Real Estate Investment Trusts have struggled with interest rate hikes, but Welltower has outperformed, with a 31% return since September 2023.
• Welltower operates a wide portfolio of senior housing and medical facilities, with plans for growth and increased occupancy rates.
• Financially, Welltower has seen revenue growth, increased investments, and a safe dividend, but trades at a high valuation with potential risks ahead.
• The low dividend yield of 2.3% leaves a lot to be desired but strong segment growth could contribute to future raises.

Overview

Real Estate Investment Trusts have been the most impacted sector from interest rate hikes over the last few years. We can see how the real estate sector ( XLRE ) has drastically underperformed the price performance of the S&P 500 ( SPY ). This comes as no surprise, however, since the sector heavily relies on access to affordable debt as a way to fuel growth. Since the sector is typically so capital intensive, the higher interest rates mean that it's more expensive to maintain a lot of debt on the balance sheet as interest expenses increase....

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