Core Insights - The market for REITs exhibits significant mispricing, presenting both opportunities for enhanced returns and challenges for investors [1][19][21] - The complexity of REITs relative to their market size contributes to this mispricing, as fewer resources are allocated for analysis [2][3][9] Group 1: Mispricing Factors - REITs have a high ratio of complexity to size, making them more prone to mispricing compared to the broader market [2] - The combined market cap of all equity REITs is approximately $1.38 trillion, with the top 10 companies accounting for nearly half of this total [4][6] - Less than $700 billion of market cap is distributed among over 250 common and preferred REIT issues, leading to small average issue sizes that limit analytical resources [9] Group 2: Analytical Challenges - REITs are difficult to analyze due to various property types and locations, requiring extensive knowledge to assess their fundamental trajectories [10][11] - Non-GAAP metrics, such as FFO and AFFO, are commonly used in the REIT industry, but definitions vary significantly across companies, complicating comparisons [12][14] - Property-level metrics and cap rates also lack standardization, leading to potential misinterpretations of performance [16][18] Group 3: Investment Opportunities - The mispricing in the REIT sector creates opportunities for skilled stock pickers to identify undervalued assets, as many REITs are trading at significant discounts to their net asset values [21][25] - The median REIT is currently trading at 84.9% of NAV, with forward FFO and AFFO multiples at 13.5X and 15.3X respectively, indicating a generally cheap valuation relative to the broader market [23][26] - Investing in a broad REIT ETF may not capture the potential of mispriced REITs, as ETFs tend to include both overvalued and undervalued stocks [24]

Core Viewpoint - The senior housing sector is poised for growth as the aging baby boomer population increases demand for housing options, leading to potential dividend growth for investors in this space [1][2]. Company Summary - Welltower, a leading real estate investment trust (REIT) in senior housing, benefits from a wealthy baby boomer demographic that can afford private pay options, reducing reliance on government assistance [2]. - Welltower has experienced significant growth in profits, with net operating income from its senior housing segment increasing by 23.4% year over year in the second quarter [4]. - The funds from operations (FFO) for Welltower are projected to be between $5.06 and $5.14 per share, indicating an 18% gain for the year [4]. - The company raised its dividend payout by 10.5% earlier this year to an annualized $2.96 per share, with expectations for further increases as FFO is anticipated to reach $5.10 per share by 2025 [5]. Industry Summary - The senior housing market is expected to grow steadily as the population ages, with a significant portion of revenue coming from private pay sources rather than government programs [2][4]. - The aging baby boomer generation, all of whom will be over 65 by 2030, represents a substantial market opportunity for senior housing investments [1].

This niche of the healthcare REIT sector got crushed by the pandemic, but now it's set to fly high as demographic trends start to play out.There are times when unexpected global events have an outsized impact on a company's business. That was true across a broad spectrum of stocks after the coronavirus pandemic began. But at the center of that storm were senior-housing property owners like Welltower (WELL 0.39%) and Ventas (VTR 1.10%).Now that much of the storm has passed, I think these two real estate inve ...

Core Insights - Senior housing is one of the fastest growing real estate sectors, with Welltower (WELL) being the primary beneficiary of same-store NOI growth, but it is now considered overvalued compared to its peers [1][24] - National Health Investors (NHI) shows similar growth potential to WELL but trades at a significantly lower multiple, making it a more attractive investment option [2][49] - The overall fundamentals of senior housing are strong, driven by demographic trends, high absorption rates, reduced construction, occupancy growth potential, and increased affordability due to rising nest eggs [10][11] Industry Overview - REITs have resumed growth, with organic same-store NOI growth averaging 2.9% annually, and healthcare is identified as the top growth sector [3][6] - Senior housing specifically has experienced low double-digit growth, contributing significantly to the healthcare sector's 6.6% same-store NOI growth [9][10] - The aging population, referred to as the "silver tsunami," is a key driver for increased demand in senior housing [10][11] Market Dynamics - The period from 2015 to 2019 saw ambitious development leading to a supply glut, which was exacerbated by the COVID-19 pandemic, resulting in negative absorption [13][15] - Senior housing began to recover in 2022, with absorption rates improving and occupancy recovering from below 80% to nearly 90% [17][18] - Current occupancy levels indicate potential for further growth, as full occupancy is around 96% [18] Company Analysis - Welltower's stock has seen a five-year price return of +181%, but its valuation is now considered excessive, trading at 38.4X AFFO compared to peers like NHI, which trades at 16X AFFO [22][34][49] - Welltower's growth appears to be a recovery from pandemic losses rather than sustainable growth, leading to a disconnect between its market price and underlying earnings [32][39] - NHI's portfolio, with a significant portion in triple net leases, has shown strong fundamentals and similar growth potential to WELL, but at a much better valuation [45][48] Financial Metrics - Welltower's current pricing reflects an implied cap rate of 3%, significantly lower than the average cap rate of over 8% for other healthcare REITs [34][36] - NHI's same-store NOI grew by 29% year-over-year, driven by occupancy gains and margin expansion, indicating strong operational performance [46][48] - The consensus estimates for NHI's AFFO suggest solid growth potential, making it an attractive investment compared to WELL [50][51]

Core Viewpoint - Senior housing is one of the fastest-growing real estate sectors, with Welltower (WELL) being the primary beneficiary of this growth. However, it is now considered overvalued compared to its peers, particularly National Health Investors (NHI), which offers similar growth potential at a significantly lower valuation [1][2][24]. Industry Overview - The senior housing sector is experiencing strong fundamentals driven by demographic trends, high absorption rates, reduced construction, occupancy upside, and increased affordability due to rising nest eggs among seniors [10][11]. - The average annual organic same-store NOI growth for REITs is 2.9%, with healthcare being the top growth sector, largely due to senior housing, which is growing in the low double digits [3][6][9]. Market Dynamics - The senior housing market faced a supply glut in 2018 and 2019, leading to negative absorption during the COVID pandemic. However, recovery began in 2022, with absorption rates rebounding to about 5% annually, while new supply has remained low at around 1% [13][17][18]. - Occupancy rates have improved from below 80% to nearly 90%, with full occupancy around 96%, indicating further growth potential [18]. Company Analysis - Welltower's stock has seen a five-year price return of +181%, but its valuation is now considered excessive, trading at 38.4X AFFO, compared to peers like NHI, which trades at 16X AFFO [22][32][34]. - NHI's growth potential is similar to that of Welltower, but it has retained a more stable structure with less volatility during the pandemic, resulting in a stronger long-term FFO/share growth rate [40][48]. Financial Metrics - Welltower's current pricing reflects an implied cap rate of 3%, significantly lower than the average cap rate of over 8% for other healthcare REITs, raising concerns about its valuation sustainability [34][36]. - NHI's same-store NOI grew by 29% year-over-year, driven by occupancy gains and higher revenue per occupied room (REVPOR), showcasing its strong operational performance [46][51]. Investment Recommendation - Given the current market conditions and valuations, it is suggested that investors consider reallocating from Welltower to NHI for better value and growth potential in the senior housing sector [52].

Core Insights - Welltower's shares have increased by 28.9% year-to-date, significantly outperforming the industry's growth of 1.7% [1][8] Company Overview - Welltower owns a diversified portfolio of healthcare real estate assets across the U.S., Canada, and the U.K., positioning itself to benefit from the aging population and rising healthcare expenditures among senior citizens [2] - The company has a healthy balance sheet and is focused on portfolio repositioning, which is expected to support future growth [2] Financial Performance - In Q2 2025, Welltower reported a normalized FFO per share of $1.28, exceeding the Zacks Consensus Estimate of $1.22, and reflecting a year-over-year increase of 21.9% [3][8] - The total portfolio's same-store net operating income (SSNOI) grew significantly, driven by the SHO portfolio, marking the 11th consecutive quarter of over 20% year-over-year growth in SHO SSNOI [5][8] - The guidance for 2025 normalized FFO per share has been raised, with the Zacks Consensus Estimate now at $5.06 [4] Market Trends - The senior citizen population is projected to rise, leading to increased healthcare expenditures, which is favorable for Welltower's SHO portfolio [5] - The industry is experiencing muted new supply, which is beneficial for Welltower's revenue growth prospects [5] Strategic Initiatives - Welltower is enhancing its SHO portfolio through strategic acquisitions and capital recycling, with $2.08 billion allocated for 78 SHO properties from the beginning of the year through July 28, 2025 [6] - The company is also optimizing its outpatient management (OM) portfolio and strengthening relationships with health system partners to support long-term growth [9] Acquisition Activity - In March 2025, Welltower announced plans to acquire the Amica Senior Lifestyles portfolio for C$4.6 billion, and in February 2025, it acquired 48 skilled nursing facilities for $990.9 million [10] Financial Health - As of June 30, 2025, Welltower had $9.5 billion in available liquidity, including $4.5 billion in cash and a fully utilized $5 billion line of credit, indicating strong financial flexibility [11] - The net debt to adjusted EBITDA ratio improved to 2.93X from 3.68X year-over-year, with a well-laddered debt maturity profile averaging 5.8 years [11]

Core Insights - High dividend yields are attractive, but total return, which includes both dividend yield and share price change, is a more relevant measure of stock performance [1] - Five stocks are highlighted for their strong total returns and significant dividend increases of 10% or more in 2025 [2] Company Summaries Comfort Systems USA (FIX) - Announced a 10% increase in its quarterly dividend to $0.50, payable on Aug. 25 [2] - Current dividend yield is 0.26%, with a payout ratio of 9.25% and a 13-year track record of dividend payments [2] - Despite a low yield, the stock has risen over 600% since early 2022, reflecting strong earnings momentum and investor confidence [4] Wingstop (WING) - Achieved a total return of nearly 28% in 2025, with an 11% increase in its quarterly dividend to $1.08 [6] - Current dividend yield is 0.32%, with a payout ratio of 18% and a 7-year track record of dividend payments [5] - The stock's quarterly payout has grown at a compound annual growth rate of over 16% in the past three years [7] McKesson (MCK) - Recently increased its quarterly dividend by 15% to $0.82, payable on Oct. 1 [9] - Current dividend yield is 0.40%, with a payout ratio of 10.99% and a 17-year track record of dividend payments [9] - The stock has provided a total return of around 23% in 2025, with consistent dividend increases enhancing long-term value [11] Encompass Health (EHC) - Announced a nearly 12% increase in its quarterly dividend to $0.19, payable on Oct. 15 [12] - Current dividend yield is 0.58%, with a payout ratio of 14.05% and a 2-year track record of dividend payments [12] - The company has achieved a total return of over 18% in 2025, indicating a focus on long-term capital returns [13] Welltower (WELL) - Increased its quarterly dividend by 10.4% to $0.74, payable on Aug. 21 [15] - Current dividend yield is 1.59%, with a payout ratio of 151.41% and a 2-year track record of dividend payments [14] - The stock has achieved a total return of over 33% in 2025, reflecting improving fundamentals and consistent dividend growth [16] Overall Market Trends - The five highlighted stocks are increasing their dividends, which is crucial as they have experienced significant share price appreciation [18] - Dividend increases help mitigate the decline in yield due to rising share prices, enhancing the overall return profile for investors [18]

Company Overview - Welltower (NYSE: WELL) is an American healthcare REIT that owns a total of 2,217 properties across the USA (1,817), United Kingdom (210), and Canada (136) [1] - The annualized net operating income (NOI) of Welltower is $3.5 billion, with 58% of this income coming from Senior Housing Operating [1] Market Position - Welltower's diverse portfolio spans multiple countries, indicating a strong international presence in the healthcare real estate sector [1] - The significant contribution from Senior Housing Operating highlights the company's focus on senior living facilities, which may be a strategic advantage given the aging population [1]

Core Insights - Welltower Inc. (WELL) reported a second-quarter 2025 normalized funds from operations (FFO) per share of $1.28, exceeding the Zacks Consensus Estimate of $1.22, and reflecting a year-over-year increase of 21.9% [1][10] - The company's revenues for the quarter reached $2.55 billion, surpassing the Zacks Consensus Estimate by 2.11%, and showing a year-over-year growth of 39.6% [2] - Welltower increased its guidance for 2025 normalized FFO per share to a range of $5.06-$5.14, up from the previous range of $4.90-$5.04, with the Zacks Consensus Estimate at $5.02 [8][10] Financial Performance - The same-store net operating income (SSNOI) for the total portfolio grew by 13.8% year over year, driven by a 23.4% increase in the seniors housing operating (SHO) portfolio [3][10] - The SHO portfolio's same-store revenues increased by 10.1% year over year, supported by a 420 basis points rise in average occupancy and a 4.9% growth in Revenue per Occupied Room (RevPOR) [3][10] - Property operating expenses rose by 36.3% to $1.51 billion year over year [5] Investment Activities - Welltower's pro-rata gross investments in the second quarter totaled $1.16 billion, which included $1.04 billion in acquisitions and loan funding, and $113.3 million in development funding [4] - The company completed pro-rata property dispositions of $28.3 million and loan repayments of $92.2 million during the quarter [4] Balance Sheet and Liquidity - As of June 30, 2025, Welltower had $9.5 billion in available liquidity, consisting of $4.5 billion in available cash and restricted cash, along with full capacity under its $5 billion line of credit [6] Dividend Information - On July 28, Welltower announced a cash dividend of 74 cents per share for the second quarter of 2025, marking a 10.4% increase compared to the previous dividend payout [7]

Financial Data and Key Metrics Changes - The company reported a strong FFO per share growth of 22%, exceeding expectations [5] - Full year FFO guidance was raised by $0.13 to $5.1 per share [6] - Same store NOI growth for the seniors housing operating portfolio was 23.4%, marking the eleventh consecutive quarter of growth exceeding 20% [6][15] - Year-over-year total portfolio same store NOI growth was 13.8% [31] Business Line Data and Key Metrics Changes - The outpatient medical business delivered a same store NOI growth of 2.6% [14] - The senior housing operating portfolio achieved another quarter of same store NOI growth well in excess of 20% [15] - The long-term post-acute portfolio saw same store NOI growth of 2.7% [32] Market Data and Key Metrics Changes - The UK portfolio experienced a 600 basis points increase in occupancy and 27% same store NOI growth [7] - Canada delivered 8.5% growth, while the U.S. and U.K. posted increases of 10.2% and 11.5%, respectively [15][16] - The company reported a 5% growth in RevPAR across all regions [17] Company Strategy and Development Direction - The company is focused on leveraging insights from its data science platform to drive portfolio and asset management initiatives [8] - A significant capital allocation of approximately $29 billion has been completed over the past five years, with $16 billion in asset sales to improve portfolio quality [9] - The company is transitioning properties to best-in-class regional operators to unlock operational potential [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand-supply dynamic for the industry, expecting further strengthening of RedPOR in the coming years [8] - The company is optimistic about the momentum in occupancy and anticipates NOI recovery in Q4 [11] - Management emphasized the importance of talent management and technology innovation as key areas of focus for future growth [36][40] Other Important Information - The company achieved a net debt to adjusted EBITDA ratio below three times and interest coverage over six times [12] - A quarterly dividend increase of 10.4% was announced, reflecting confidence in cash flow durability [34] - The company has trained over 8,000 site employees on its Well Towered Business System [21] Q&A Session Summary Question: Future growth potential and capital deployment - Management highlighted that while they are proud of achievements, they remain focused on continuous improvement and avoiding complacency [45][46] Question: Performance of non-same store assets - Management noted that non-same store assets include under-occupied and under-optimized properties, which are expected to improve over time [53][54] Question: Technology and data integration for customer experience - Management discussed the evolution of their technology strategy to enhance customer experience and operational efficiency [58][61] Question: Competitive dynamics for investments - Management indicated that there are ample opportunities to enhance cash flow profiles in a fragmented industry [80][82] Question: Optimal capital stack and leverage - Management emphasized the importance of maintaining a strong balance sheet and liquidity while exploring various capital sources for investments [86][88] Question: Potential for margin expansion - Management expressed confidence in significant margin expansion opportunities driven by revenue growth and operational efficiencies [90][92]