Welltower, Inc. Offers Investors 4% Dividend Yield, 40% One-Year Total Return (NYSE:WELL)
By: Ned Piplovic,
Welltower, Inc. (NYSE:WELL) – a health care infrastructure real estate investment trust (REIT) – has delivered to its shareholders rising dividend income over the past two decades and currently offers a 4% dividend yield, as well as double-digit percentage total returns.
Prior to paying a flat annual dividend for the past three years, the company failed to boost its annual dividend payout amounts only twice over the previous two decades starting in 1997. A quick glance at the company’s dividend distribution graph could create the appearance that the company cut its dividend at the beginning of 2007. However, a closer examination reveals that the company paid a portion of the Q1 2017 dividend on December 28, 2006, as part of integrating the acquisition of Windrose Medical Properties.
The company’s share price lost nearly half of its value in the aftermath of the 2008 financial crisis. However, after hitting its 10-year low in March 2009, the share price reversed direction, recovered all those losses by January 2012 and continued to rise. The current closing price is more than triple the price from March 2009. While resuming its long-term uptrend after the 2008 drop, the share price has been trading with more volatility over the past decade than it did prior to the 2008 crisis.
However, the volatility subsided over the trailing 12-month period and technical indicators suggest a strong probability that the current uptrend might continue in the near future. The 50-day moving average had crossed above its 200-day equivalent in July 2018 and remained above the 200-day moving average throughout the trailing one-year period.
Additionally, the share price traded above both moving averages except for three brief dips below the 50-day moving average — late September and early October 2018, late December 2018 and early January 2019 and April 2019. While these dips pushed the 50-day average down, the 50-day average remained above and widened its distance from the 200-day average. By early August 2019, the 50-day average had risen to nearly 10% above the 200-day moving average.
In addition to the positive technical indicators, Welltower positioned itself to take advantage of the aging population and increasing healthcare expenditures in the United States, Canada and the United Kingdom. Furthermore, with the weakening global economies and even concerns over the economic growth in the United States, Welltower’s business model might be an opportunity for investors to diversify their portfolios.
Central banks are reducing interest rates on fears of an economic downturn. In low interest rate environments, investors seek alternative opportunities to move their capital. Traditionally, real estate, as well as the utilities sector, have offered these alternatives. Welltower combines the advantages of real estate investments with the expanding demand for housing and care facilities in the health care sector.
As always, investors must complete their own equity analysis to determine whether the Welltower stock is a good fit for their investment portfolio strategy. However, interested investors whose analysis confirms a good fit should consider taking a long position before the company’s ex-dividend date on August 14, 2019. All investors who claim stock ownership before that ex-dividend date will be eligible to receive the next round of dividend distributions on the August 22, 2019, pay date.
Welltower, Inc. (NYSE:WELL)
Headquartered in Toledo, Ohio, and founded in 1970, Welltower, Inc. (NYSE:WELL) is a REIT that invests in health care infrastructure. The company offers real estate infrastructure funding to leading senior housing operators, post-acute providers and health systems. The trust operates through three business segments and owns interests in properties concentrated in major, high-growth markets in the United States, Canada and the United Kingdom. The Senior Housing segment offers several types of services, which include independent living, assisted living and memory care communities. Additionally, the Post-Acute Care segment provides rehabilitation centers that specialize in treating patients recovering from illness or surgery. Finally, the Outpatient Medical segment offers facilities for performing minor medical procedures that do not require a hospital environment. These facilities are generally more conveniently located, easier to access and provide a higher level of customer service. The company changed its name from Health Care REIT to Welltower in September 2015 and also changed its ticker symbol in February 2018 from “HCN” to “WELL”. As of June 2019, the company owned and operated a total of 1,434 facilities in 46 states and the District of Columbia. Additionally, Welltower also owned and operated 155 facilities in Canada and 121 facilities in the United Kingdom.
The current $0.89 quarterly dividend converts to a $3.48 annual distribution and a 4% forward dividend yield. This dividend yield is 15% lower than the company’s 7.72% yield average over the last five years. The dividend yield declined because the share price advanced faster than the annual dividend distributions over the last five years.
However, while trailing its own five-year dividend yield average, the current 4% yield is nearly 37% higher than the 2.94% simple average yield of the entire Financial sector. Additionally, the current yield is also slightly above the 3.94% simple average yield of Welltower’s peers in the Healthcare Facility REITs industry segment.
Prior to pausing its annual dividend hikes in 2016, the company advanced its dividend payout nearly 50% over 15 consecutive annual dividend hikes. This advancement is equivalent to an average annual growth rate of 2.7%. Even with the additional dividend hikes misses — in 2002 and 2003 — Welltower still has enhanced its annual dividend amount nearly 70% since 1997 and still managed to maintain an average growth rate of 2.3% per year for the last 22 years.
Unaffected by the recent market selloff, Welltower’s share price closed on August 7, 2019, at its new all-time high of $87.25. This price level growth combined with the dividend income payouts to deliver a total return of nearly 43% over the trailing 12-month period. While a share price pullback in late 2015 and early 2016 limited the three-year total return to 25.5%, the total return over the past five years was 60%.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.