UBS Eyes Senior Housing REITs for Pre-Earnings Gains

As earnings season approaches, UBS analyst Michael Goldsmith is signaling a positive outlook for senior housing and skilled nursing real estate investment trusts (REITs). These dividend-paying stocks are expected to deliver good news, buoyed by strong operating fundamentals and strategic acquisitions, according to a recent note from the financial institution.

Demographic Tailwinds and Supply Constraints Favor Senior Housing

Goldsmith highlighted that the senior housing sector continues to benefit from a favorable supply-demand dynamic. Muted new development, coupled with increasing demand from an aging baby boomer population, is creating a supportive environment. With the first baby boomers turning 80 this year and the 80+ population projected to reach nearly 23 million by 2035, demand is significantly outpacing new construction.

Data from the National Investment Center for Seniors Housing & Care (NIC) indicates that occupancy rates neared 90% in the second quarter, underscoring the robust demand. Furthermore, recent conference calls suggest that new development projects are largely uneconomical at current rental rates, reinforcing expectations of limited future supply.

UBS 'Buy' Recommendations

UBS has identified four specific REITs within this subsector that it rates as 'Buy':

1. American Healthcare REIT (AHR)

American Healthcare REIT, with a dividend yield of 1.89%, is set to report its second-quarter results on August 6. Goldsmith anticipates external growth to be a key earnings driver for the company, which owns 325 healthcare properties, including senior housing and skilled nursing facilities. He raised his price target to $63 from $60, implying a 17% upside. AHR recently secured approximately $700 million in equity to fund a substantial development pipeline, reinforcing its confidence in acquisition opportunities and favorable economics with initial yields in the high 5% to low 6% range.

2. Welltower (WELL)

Welltower, a large operator of senior and wellness housing communities, is expected to announce earnings on July 27. UBS increased its price target for Welltower to $271 from $249, suggesting a 17% potential upside. This revision reflects improved growth trends, a strategic shift towards more operating assets, a positive management meeting, and a better cost of capital. The company's proprietary 'Welltower Business System' has also seen enhancements. Welltower offers a 1.29% dividend yield and has already gained 24% year-to-date.

3. CareTrust REIT (CTRE)

UBS maintained its price target of $48 for CareTrust REIT, indicating an 17% potential upside. The REIT, yielding 3.88%, is benefiting from its expansion into U.K. care homes and senior housing. With a portfolio of 588 properties, CareTrust is noted for its opportunistic approach across senior housing, willing to underwrite a wide range of opportunities. Its next earnings date is estimated for early August.

4. Omega Healthcare Investors (OHI)

The price target for Omega Healthcare Investors was maintained at $54, representing an 11% upside. This REIT, with a significant 5.57% dividend yield, operates over 1,000 properties, primarily skilled nursing and assisted living facilities. Omega Healthcare is scheduled to release its earnings on July 30. The company's shares have climbed 9% year-to-date.

Analyst Projections

Goldsmith's 2026 core funds from operations (FFO) estimates are slightly above or in line with consensus for three of the four companies. For American Healthcare REIT, he projects $2.10 per share (vs. $2.07 consensus). For Welltower, his estimate is $6.27 per share (vs. $6.29 consensus). For CareTrust REIT, he forecasts $2.04 per share (in line with consensus). For Omega Healthcare, he anticipates $3.25 per share (vs. $3.26 consensus).

Note: This article refers to 2026 earnings estimates, but the original publication date suggests these are forward-looking estimates from the time of the article's release.