Welltower Inc (HCN): A High-Yield Medical REIT Blue Chip

This shows both the kind of conservative management team and enduring corporate culture in place at Welltower. Specifically, since management recognizes that interest rates are likely to rise over time, the company is deleveraging now to ensure maximum financial flexibility in the future. This well help Welltower continue growing both in a higher rate environment, as well as during the next economic downturn.

Overall, Welltower’s dividend is very safe because of the company’s reasonable payout ratios, recession-resistant business, conservative management style, and proven commitment to the dividend.

Dividend Growth Analysis

Our Dividend Growth Score answers the question, “How fast is the dividend likely to grow?” It considers many of the same fundamental factors as the Safety Score but places more weight on growth-centric metrics like sales and earnings growth and payout ratios. Scores of 50 are average, 75 or higher is very good, and 25 or lower is considered weak.

Welltower’s Dividend Growth Score is 26, which indicates that the company’s dividend growth potential is somewhat weaker than average.

As seen below, Welltower’s dividend has compounded by just 2.3% per year over the last 20 years and by 3.8% annually over the last five years.

Source: Simply Safe Dividends

Welltower’s rate of dividend growth isn’t eye-popping, the company has paid uninterrupted dividends since 1971 while increasing its dividend for more than 10 consecutive years, making it a Dividend Achiever (see all Dividend Achievers here).

Management raised the dividend by 4.2% at the beginning of this year, and low- to mid-single digit dividend increases will likely continue, matching underlying growth in FAD.

Based on the company’s impressive growth this year, a time when Welltower’s property acquisition has been slower than normal (due to management believing attractive deals are hard to come by), and the recent California mega-deal, I think that 4% to 5% is a reasonable growth rate that investors can expect.

That’s especially true given that management’s deleveraging over the past five years sets Welltower up for a potential major acquisition in the future.

Even if management doesn’t choose to pursue a big purchase, in a rising interest rate environment, it’s likely that Welltower will be able to find more attractively priced growth prospects upon which to unleash its nearly $3 billion of liquidity.

Welltower’s dividend has been paid for 181 consecutive quarters, and income investors should continue to be rewarded by the company.