The aging population will be a tailwind for the stock market — and two dividend stocks are expected to benefit, according to UBS. Longevity is one of three “transformational innovation opportunities” that will drive equity markets in the next decade, a team of strategists said in a note Wednesday. The other two are artificial intelligence and power and resources. “The combination of ever-increasing lifespans and a demographic shift toward an older population creates a range of investment opportunities,” the UBS strategists wrote. One area that is already established in the space is retirement living, which is growing at a 4% compound annual growth rate until 2030, they said. The oldest baby boomers are rapidly approaching their 80th birthday and that is going to increase demand for senior housing options, such as independent living, assisted living and nursing homes. The National Investment Center for Seniors Housing & Care predicts that 200,000 additional senior housing units will be needed in 2025, an additional 500,000 units by 2028 and another 775,000 units by 2030. Senior housing stocks UBS sees two real estate investment trusts that will benefit from the trend, and they pay solid dividends. Ventas , whose portfolio includes senior housing communities, skilled nursing facilities and medical office buildings, has a 2.8% dividend yield. Analyst Jonathan Woloshin likes the diversity in its real estate holdings and geographic locations. Ventas has 1,400 properties across the United States, Canada and the United Kingdom. VTR YTD mountain Ventas The ongoing recovery in senior housing, which took a hit during the Covid pandemic, has led to an uptick in Ventas’ senior housing occupancy levels, he pointed out. New senior housing supply is now at its lowest level since the first quarter of 2013, he noted. “The increase in occupancy is leading to stronger pricing power and margin improvement,” Woloshin said. In addition, the inconsistent management execution seen in recent quarters has abated and ventas’ shares are closing the valuation gap with the company’s largest peer, he added. Shares are up about 16% year to date. Welltower also has a diversified portfolio. The company boasts more than 1,500 senior housing, post-acute communities and outpatient medical properties in the U.S., U.K. and Canada. It pays a dividend yield of about 1.8%. “WELL has a strong senior housing portfolio located in a number of high-barrier-to-entry markets, something that continues to benefit the company in a post- COVID-19 world,” UBS analyst Thomas Parmentier wrote. “In addition, senior housing occupancy gains have bolstered WELL’s stock price.” WELL YTD mountain Welltower The stock, which is up 21% so far this year, is trading at a “significant premium valuation” to its peers, he pointed out. However, he thinks a premium is justified given Welltower’s strong operational performance and growth. “WELL is in solid financial shape, in our view, with an investment-grade balance sheet, a good management team, manageable debt maturities, and solid access to liquidity,” Parmentier said. “We believe the dividend is safe and could increase should operating results continue to improve.” Get Your Ticket to Pro LIVE Join us at the New York Stock Exchange! Uncertain markets? Gain an edge with CNBC Pro LIVE , an exclusive, inaugural event at the historic New York Stock Exchange. In today’s dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12. Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles, and Dan Ives, with a special edition of Pro Talks with Tom Lee. You’ll also get the opportunity to network with CNBC experts, talent and other Pro subscribers during an exciting cocktail hour on the legendary trading floor. Tickets are limited!
