Welltower: Sell-Off Is Overdone

| About: Welltower Inc. (HCN)


Welltower is being pushed down near 52-week lows.

Peers issued poor guidance.

HCN has not released any updated guidance ahead of next week's earnings.

Welltower, Inc. (NYSE:HCN) is being pushed down near its 52-week lows, down over 9% as of midday Thursday, after a few peers released earnings and guidance Thursday morning.

Peers HCP, Inc. (NYSE:HCP), Brookdale Senior Living, Inc. (NYSE:BKD), and Medical Properties Trust, Inc. (NYSE:MPW) all reported results that were fairly strong, yet issued weaker-than-expected FY 2016 guidance. One of Welltower's largest peers, HCP, announced 2016 FFO per share guidance that was a considerable distance short of Wall Street expectations.

Welltower, one of the largest healthcare REITs, reports earnings next week on Thursday, February 18th, before the market opens. A few reasons I am considering adding to my current long position in Welltower today and before next week's earnings include:

1. Continued growth - When announcing the latest quarter's earnings, Welltower raised its fiscal-2015 guidance, expecting full-year FFO per share of $4.32 to $4.37, a 5-6% raise over $4.13 per share in 2014. HCP's 2015 adjusted FFO per share growth announced Thursday morning came in at 4%.

Below is a three-year chart of FFO per share growth for Welltower and its peers:

HCN FFO Per Share (<a href=

HCN FFO Per Share (TTM) data by YCharts

2. Balance sheet strength - The company is well managed and has a relatively conservative balance sheet. The chart below shows the debt-to-equity ratio of above-mentioned peers compared to Welltower:

HCN Debt to Equity Ratio (Quarterly) Chart

HCN Debt to Equity Ratio (Quarterly) data by YCharts

Over the last five years, HCN has kept its capitalization both conservative and steady.

3. Dividend - With today's sell-off and the company's latest dividend raise, the yield now stands at 6.25% (using Thursday afternoon's price of around $55). Reinvesting dividends at this rate should reap great rewards for long-term holders.


Welltower's sell-off today seems to be a bit overdone as the company itself has had no bad news. I am willing to raise my stake in this company as everything I currently see about it is fine. HCP's guidance this morning could be a warning about future growth for Welltower as well, however, the entire market has struggled to find growth as of late, and I believe the company's solid footing and dividend will put a floor on the share price.

Long-term trends for the spending in healthcare, especially with today's aging population, should ensure that long-term Welltower holders can benefit from short-sighted traders today.

Disclosure: I am/we are long HCN.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Tagged: , , , REIT - Healthcare Facilities, Alternative Investing
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