By Ian Salisbury
Senior housing is one of the real estate industry's biggest growth areas, and a 16% dividend hike by CareTrust further shows why investors are so enamored with the sector.
The oldest baby boomers are now entering their 80s, and a shortage of senior and assisted living facilities has turned REITs such as Welltower and Ventas into investor darlings. Shares of both companies have surged more than 30% in the past year.
CareTrust, with about 580 properties spread across the U.S. and U.K., is a smaller sibling with a market capitalization of around $9 billion. (WellTower's is around $145 billion.) But it is showing the kind of growth investors are bound to like.
Earlier this month CareTrust reported adjusted funds from operation of 47 cents a share, up 18% year over year. It also forecast 2026 AFFO of $1.90 to $1.95 a share, which implies growth 8% to 11%. Still, given the pace at which the company has been making new investments, Wall Street analysts forecast $2 a share, on average.
Deutsche Bank analyst Omotayo Okusanya, who rates the stock a Buy, noted his forecast for 2026 AFFO included $442 million of new property investments, compared with just $214 million the company's outlook.
"We see the potential for guidance to grind higher as the year progresses," he wrote.
What income-hungry REIT investors may be most interested in is CareTrust's big dividend hike. On Friday, the company raised its quarterly dividend to 39 cents a share from 33.5 cents. The new rate is payable April 15 to shareholders of record March 31.
Like other senior housing REITs, shares of CareTrust have rallied sharply in the past year, gaining about 49%. The share price gains had pushed its dividend yield down from 4.1% to 3.3%.
The new 39-cent rate implies a yield of 3.9%, based on Friday's closing price of $40.03. To put that in context, the State Street Real Estate Select Sector SPDR, a popular ETF that owns REITs in the S&P 500, yields 3.3%.
One knock against CareTrust is its valuation. Following the past year's big run up, shares trade at nearly 20 times 2026 FFO, up from just 15.5 times 12 months ago. The real estate Select Sector ETF trades at just 18 times. Still, CareTrust looks like a bargain compared with shares of Welltower, which trade hands at 33 times.
Wall Street analysts think CareTrust stock has room to run. Their average target prices is around $43.80, representing upside of about 8% from today's levels of $40.41.
Write to Ian Salisbury at ian.salisbury@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 16, 2026 15:48 ET (19:48 GMT)
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