The growth prospects for healthcare Real Estate Investment Trusts (REITs) are promising. They are driven by demographic trends, increasing healthcare spending, technological advancements, and consolidation in the healthcare industry.

Amid this backdrop, investors could consider adding high-growth healthcare REIT stocks, Welltower Inc. (WELL), CareTrust REIT, Inc. (CTRE), and Sabra Health Care REIT, Inc. (SBRA) to their watchlists. Before exploring the fundamentals of these stocks, let’s first understand what’s shaping the healthcare REIT industry’s prospects.

Healthcare REITs typically own a diversified portfolio of healthcare properties, including hospitals, medical office buildings, senior housing, and skilled nursing facilities. This diversification helps mitigate risk and provides opportunities for growth across different sectors of the healthcare industry.

The aging population in the United States is driving demand for healthcare services, creating opportunities for healthcare REITs to capitalize on the growing market. Healthcare spending is increasing due to factors such as technological advancements, rising chronic disease rates, and the expansion of healthcare coverage, leading to a need for more healthcare facilities.

In the first quarter of 2024, healthcare REITs showed strong leasing performance and favorable lease terms in medical office sectors, reporting an FFO of $667 million. Market conditions for healthcare REITs show cap rates tightening for quality medical office properties due to high investor demand and stable income profiles.

Healthcare real estate has a history of strong fundamentals, with stable tenant leases and consistent rental income. Healthcare REITs benefit from high occupancy rates and long-term leases, providing a stable income stream and potential for growth. Furthermore, the REIT market is poised to reach $333.01 billion by 2027, growing at a CAGR of 2.8%.

With these favorable trends in mind, let’s delve into the fundamentals of the three REITs – Healthcare stocks, starting with the third in line.

Stock #3: Welltower Inc. (WELL)

WELL drives the transformation of healthcare infrastructure. It invests with leading senior housing operators, post-acute providers, and health systems to fund the real estate and infrastructure needed to scale innovative care delivery models and improve people’s wellness and overall healthcare experience. 

WELL has been paying dividends to its shareholders for the past 34 years. Its annualized dividend of $2.44 per share translates to a dividend yield of 2.36% on the current share price. Its four-year average yield is 3.36%.

Over the past three and five years, WELL’s revenue grew at CAGRs of 16.5% and 7.4%, respectively. Its total assets grew at a CAGR of 10.5% over the past three years.

WELL’s total revenues for the fiscal first quarter that ended March 31, 2024, amounted to $1.86 billion, up 19.2% year-over-year. Its adjusted EBITDA came to $732.37 million. The company’s normalized FFO attributable to common stockholders stood at $585.21 million and $1.01 per share, up 39.5% and 18.8% from the prior-year quarter, respectively.

For the quarter ending June 30, 2024, WELL’s revenue and FFO are expected to increase 15.2% and 11.5% year-over-year to $1.92 billion and $1, respectively. It surpassed consensus FFO estimates in each of the trailing four quarters, which is impressive. The stock has gained 28% over the past year to close the last trading session at $103.35.

It’s no surprise that WELL has a B grade for Growth, as reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Within the REITs – Healthcare industry, it is ranked #9 out of 14 stocks. Click here for the additional POWR Ratings of WELL (Value, Momentum, Stability, Sentiment, and Quality).

Stock #2: CareTrust REIT, Inc. (CTRE)

CTRE acquires, finances, develops, and owns real property for lease to third-party tenants in the healthcare sector. 

On June 4, 2024, CTRE celebrated its 10-year anniversary by announcing two strategic transactions totaling approximately $180 million, further proving its commitment to growth and excellence in the healthcare sector. They also quoted a reloaded pipeline of approximately $460 million.

On June 3, 2024, CTRE announced that it funded $90 million of a senior mortgage loan in connection with the borrower’s acquisition of an 8-facility skilled nursing portfolio located in the Southeastern United States. The portfolio, consisting of 1,011 skilled nursing beds and 150 assisted living beds, had been acquired by an experienced regional healthcare real estate owner and operator.

CTRE has been paying dividends to its shareholders for the past nine years. Its annualized dividend of $1.16 per share translates to a dividend yield of 4.65% on the current share price. Its four-year average yield is 7.50%. Over the past five years, CTRE’s dividend payments have grown at a CAGR of 5.8%.

Over the past three and five years, CTRE’s revenue grew at CAGRs of 8.6% and 7.8%, respectively. Its EBIT grew at a CAGR of 11.1% over the past three years.

For the first quarter that ended March 31, 2024, the company’s total revenues and normalized EBITDA attributable to CTRE stood at $63.07 million and $56.86 million, up 24.6% and 24.2% year-over-year, respectively. Its normalized FFO attributable to CTRE increased 32.9% from the year-ago quarter to $46.51 million. For the same quarter, its normalized FFO per share attributable to CTRE came in at $0.35.

Street expects CTRE’s FFO and revenue for the quarter ending June 30, 2024, to increase 4.5% and 22.1% year-over-year to $0.37 and $62.93 million, respectively. The company surpassed consensus revenue estimates in each of the trailing four quarters. The stock has gained 25.7% over the past year to close the last trading session at $24.93.

CTRE has a B grade for Growth. It is ranked #7 in the same industry. Get CTRE’s Value, Momentum, Stability, Sentiment, and Quality ratings here.

Stock #1: Sabra Health Care REIT, Inc. (SBRA)

SBRA’s investment portfolio includes 377 real estate properties held for investment, 12 investments in loans receivable, five preferred equity investments, and two investments in unconsolidated joint ventures.

SBRA has been paying dividends to its shareholders for the past 12 years. Its annualized dividend of $1.20 per share translates to a dividend yield of 7.94% on the current share price. Its four-year average yield is 8.79%.

Over the past three and five years, SBRA’s revenue grew at CAGRs of 2.7% and 2.1%, respectively.

SBRA’s total revenues for the fiscal first quarter that ended March 31, 2024, increased 3.4% year-over-year to $166.75 million. Its cash, cash equivalents, and restricted cash at the end of the period rose 70.4% from the prior-year quarter to $65.93 million. In addition, its normalized FFO stood at $78.44 million, up 2% from the year-ago quarter. Also, its normalized FFO per common share grew 3% year-over-year to $0.34.

Analysts expect SBRA’s revenue for the quarter ending June 30, 2024, to increase 2.7% year-over-year to $165.47 million. Its FFO for the quarter ending September 30, 2024, is expected to rise 4.2% year-over-year to $0.34. The company surpassed Street revenue estimates in three of the trailing four quarters. Over the past year, the stock has gained 25.1%, closing the last trading session at $15.12.

SBRA has a B grade for Growth. It is ranked #4 in the REITs – Healthcare industry. Click here to see SBRA’s Value, Momentum, Stability, Sentiment, and Quality ratings.

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WELL shares were trading at $103.66 per share on Friday afternoon, up $0.31 (+0.30%). Year-to-date, WELL has gained 16.43%, versus a 15.40% rise in the benchmark S&P 500 index during the same period.

About the Author: Neha Panjwani

From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance. More...

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