Why Welltower Stock Topped the Market on Thursday

Source The Motley Fool

Key Points

  • In his view, it's now a buy.

  • Its dividend yield is relatively low, however.

  • 10 stocks we like better than Welltower ›

Investors owning Welltower (NYSE: WELL) were doing relatively well on Thursday. Shares of the healthcare-focused real estate investment trust (REIT) received an upgrade from an analyst who tracks its fortunes, making the stock more attractive. The company's shares bumped 1.6% higher on a day when the benchmark S&P 500 index essentially flatlined.

Successfully Chased

Before market open that day, Michael Mueller of JPMorgan Chase's J.P. Morgan changed his rating on Welltower to overweight (read: buy) from his previous neutral. He also set a price target of $260 per share, which is 11% higher than Thursday's closing price.

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Two people participating in a telehealth session.

Image source: Getty Images.

Mueller's adjustment was part of a broader reevaluation of J.P. Morgan's REIT coverage, according to reports. The analyst believes that the prospects for Welltower are clearly positive, and the company is poised for several years of better-than-average growth.

He pointed to the REIT's ability to post impressive net operating income growth, writing that this is not only impressive for a healthcare REIT, but also admirable for any company in the sector.

That's a skinny yield figure

I'd broadly agree with that assessment and add that Welltower is an effective operator in one particular niche -- senior housing -- that is set to grow organically as the American population ages.

However, the steadily rising popularity of this stock as a top pick among REITs has lowered its dividend yield considerably. This stands at 1.5%, well below the high-yield dividends that predominate in the REIT sector. While I like Welltower as a company, I think better and more lucrative investment opportunities lie in other REITs.

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JPMorgan Chase is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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