Welltower (NYSE: HCN) and HCP (NYSE:HCP) are both large-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their profitability, institutional ownership, valuation, earnings, dividends, risk and analyst recommendations.

Risk and Volatility

Welltower has a beta of 0.23, meaning that its share price is 77% less volatile than the S&P 500. Comparatively, HCP has a beta of 0.37, meaning that its share price is 63% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Welltower and HCP, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Welltower 2 6 7 0 2.33
HCP 1 13 2 0 2.06

Welltower currently has a consensus price target of $72.58, suggesting a potential upside of 0.91%. HCP has a consensus price target of $32.17, suggesting a potential upside of 9.00%. Given HCP’s higher possible upside, analysts plainly believe HCP is more favorable than Welltower.

Institutional and Insider Ownership

86.0% of Welltower shares are held by institutional investors. Comparatively, 89.7% of HCP shares are held by institutional investors. 0.2% of Welltower shares are held by insiders. Comparatively, 0.2% of HCP shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Welltower and HCP’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Welltower 28.94% 8.74% 4.39%
HCP 32.16% 9.96% 4.19%

Dividends

Welltower pays an annual dividend of $3.48 per share and has a dividend yield of 4.8%. HCP pays an annual dividend of $1.48 per share and has a dividend yield of 5.0%. Welltower pays out 108.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. HCP pays out 102.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Welltower has raised its dividend for 7 consecutive years. HCP is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation & Earnings

This table compares Welltower and HCP’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Welltower $4.19 billion 6.33 $2.05 billion $3.21 22.41
HCP $2.02 billion 6.85 $1.17 billion $1.45 20.35

Welltower has higher revenue and earnings than HCP. HCP is trading at a lower price-to-earnings ratio than Welltower, indicating that it is currently the more affordable of the two stocks.

Summary

HCP beats Welltower on 9 of the 17 factors compared between the two stocks.

Welltower Company Profile

Welltower Inc. invests with seniors housing operators, post-acute providers and health systems to fund real estate and infrastructure. The Company invests in seniors housing and healthcare real estate. It operates in three segments: triple-net, seniors housing operating and outpatient medical. Welltower, a real estate investment trust (REIT), owns interests in properties concentrated in markets in the United States, Canada and the United Kingdom, consisting of seniors housing and post-acute communities, and outpatient medical properties. Its triple-net properties include independent living facilities, independent supportive living facilities (Canada), continuing care retirement communities, assisted living facilities, care homes with and without nursing (the United Kingdom), Alzheimer’s/dementia care facilities, long-term/post-acute care facilities and hospitals. Its outpatient medical properties include outpatient medical buildings.

HCP Company Profile

HCP, Inc. is a self-administered real estate investment trust. The Company invests in real estate serving the healthcare industry in the United States. The Company’s segments include senior housing triple-net (SH NNN), senior housing operating portfolio (SHOP), life science and medical office. Its senior housing facilities include independent living facilities, assisted living facilities, memory care facilities, care homes, and continuing care retirement communities. Its Life science properties contain laboratory and office space for biotechnology, medical device and pharmaceutical companies, scientific research institutions, government agencies and other organizations. Its Medical office buildings contain physicians’ offices and examination rooms, and may include pharmacies, hospital ancillary service space and outpatient services. As of December 31, 2016, it had interests in and managed 15 hospitals, 61 care homes in the United Kingdom and five post-acute/skilled nursing facilities.

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