Will Welltower Inc. Raise Its Dividend in 2016?

Source: Welltower.

Welltower is a leader in its business, but the market remains extremely fragmented. The U.S. healthcare real estate market is estimated to be approximately $1 trillion in size, and Welltower, the market leader, controls just 2.5% of that. In other words, there's tremendous room to pursue strategic acquisitions from the properties that exist right now -- not even counting the fact that demand will multiply in the coming decades.

Source: Welltower.

Further, Welltower offers a better product than its competitors, with newer facilities that are located in higher-income areas. It has also established partnerships with some of the best operators in the business. More than 35% of the portfolio is operated by the top three partners: Sunrise Senior Living, Genesis HealthCare, and Brookdale Senior Living, and more than 60% of new investments are made alongside trusted existing partners such as these.

Dividend history and future projections

Welltower doesn't have a perfect history of increasing its dividend, but it's pretty close. The company has increased its payout by an average of 5.1% per year since 1971. As you can see from the graphic below, there have been few years in which Welltower's dividend decreased or remained the same.

Source: Welltower.

Welltower's funds from operations (or FFO, the earnings of the REIT world ) have grown at a steady rate in recent years, and the company expects similar growth this year. For 2015, the company expects normalized FFO in the $4.32-$4.37 range, which represents an increase of 5%-6% over 2014. Since the historical dividend increase discussed earlier is within this range, the FFO growth certainly supports a higher payout, provided the positive FFO trajectory continues during the next few quarters.

While nothing in dividend investing is guaranteed, there's no reason to believe that Welltower won't increase its dividend in 2016. Welltower has historically announced dividend increases with its third-quarter earnings report, and I fully expect the company to announce an increase of approximately 5% in the third quarter of 2016.


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The article Will Welltower Inc. Raise Its Dividend in 2016? originally appeared on

Matthew Frankel owns shares of Welltower. The Motley Fool recommends Welltower. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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