Buy these dividend-paying real estate stocks ahead of earnings, says UBS

UBS Highlights Dividend Real Estate Stocks as Attractive Picks Before Earnings Season for Investors

Imagine a growing town where more people need homes, but not enough new houses are being built. That’s what’s happening with senior housing in America, and it’s catching the eye of investors.

Why This Matters for Investors

Senior housing and skilled nursing companies are like landlords for older adults who need a place to live or extra care. These companies often pay steady dividends, which can be great for investors looking for regular income. Right now, experts think these businesses might do well because more people need their services than ever before, but not many new buildings are being added.

The Bull Case: Reasons to Be Positive

  • Big Demand, Little Supply: The U.S. has more people getting older, especially as baby boomers turn 80. By 2035, almost 23 million Americans will be 80 or older, up from about 15 million in 2025. (U.S. Census Bureau)
  • Full Houses: Nearly 90% of senior living spaces were filled in the second quarter, according to industry data. That’s close to record highs.
  • Strong Acquisitions: Companies are buying more properties, which could help them grow faster and make more money.
  • Solid Dividend Yields: Some of these companies pay higher-than-average dividends, giving investors a steady paycheck.
  • Growth Leaders: UBS likes stocks like American Healthcare REIT (AHR), Welltower, CareTrust REIT, and Omega Healthcare Investors, all of which are expected to keep growing.

The Bear Case: Risks to Watch Out For

  • Building Costs: New senior housing is expensive to build right now, so if costs fall or rents rise, more supply could come online, changing the balance.
  • Economic Shifts: If the economy slows down, it could become harder for people to afford senior housing, or for companies to keep raising rents.
  • Company-Specific Risks: Not all companies are equal. Some may face challenges with management, debt, or keeping their homes full.
  • Healthcare Changes: Rules and payments for nursing care can change, which might affect profits.
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Company Highlights

  • American Healthcare REIT (AHR): Has 325 properties and just raised $700 million to buy more. UBS thinks the stock could go up 17% and pays a 1.89% dividend.
  • Welltower: Owns over 2,500 communities, expects steady growth, and pays a 1.29% dividend. Its shares are up 24% this year.
  • CareTrust REIT: Focuses on senior homes, including in the U.K., and pays a 3.88% dividend. Shares are up 11% this year.
  • Omega Healthcare Investors: Has more than 1,000 properties, mostly skilled nursing, and pays a big 5.57% dividend. Shares are up 9% this year.

What History Tells Us

During past periods when America’s population aged quickly, companies serving seniors saw steady growth. For example, a 2019 study from the Urban Institute found that demand for senior housing grew as the baby boomer generation aged, with occupancy rates rising and investment returns outpacing some other real estate sectors.

Investor Takeaway

  • Diversify: Consider adding a mix of senior housing and healthcare REITs to your portfolio for steady income and growth potential.
  • Watch Occupancy Rates: High occupancy means strong demand; if this starts to fall, it could signal trouble ahead.
  • Look for Dividend Growth: Focus on companies with a good track record of paying and raising dividends.
  • Stay Informed on Demographics: Trends like the aging population are powerful forces that can shape markets for decades.
  • Monitor Policy Changes: Keep an eye on healthcare and housing policy, since these can affect profits and stock prices.

For the full original report, see CNBC

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