![This stock could soar 25% as the population ages, according to Bank of America](https://news7g.com/wp-content/uploads/2024/07/108006208-1721059726851-gettyimages-1045351808-mon1170019-780x470.jpeg)
Senior housing stocks are set to soar as the U.S. population ages, according to Bank of America. Ventas is one of the names that will benefit, analyst Joshua Dennerlein said in a note Monday. As a real estate investment trust, the company also provides income to investors. It currently has a dividend yield of about 3.4%. Dennerlein reiterated his buy rating on the stock and raised his price target to $66 from $54, suggesting a 25.8% upside from Friday’s close. The stock is up more than 5% year to date. “The recovery in senior housing occupancy rates from the COVID-19 pandemic continues to be faster than the market expects, and demographic trends have shifted from headwinds to tailwinds,” he wrote. The industry was hit hard during the pandemic but is on the mend as occupancy rates improve. Demand is rising while new construction has slowed due to the health crisis. At the same time, Americans are aging. By 2030, all baby boomers, who include those born between 1946 and 1964, will be 65 or older, according to the U.S. Census Bureau. Ventas’ portfolio includes senior housing communities, medical office buildings and other health care facilities. Bank of America expects “significant” growth in senior housing operating margins going forward, driven by cyclical and secular growth. Dennerlein said the bank expects margins to reach 31.7% by 2028, but an analysis found Ventas could achieve a senior housing operating margin of 35.8% with its current portfolio structure. For comparison, that margin was 25.1% in 2023 and peaked at 33.8% pre-pandemic in 2016, he noted. VTR 1Y mountain Ventas’ one-year performance He said the company should also see growth in its leases to Brookdale Senior Living, which operates independent living communities, assisted living, memory care and continuing care retirement communities. Brookdale operates a portfolio of 121 properties in Ventas’ net lease structure, which accounts for 7.4% of total net operating income, he noted. Dennerlein said Brookdale, whose lease with Ventas expires in 2025, could exercise its option to renew and cash rents could rise as much as 10%. However, he said not renewing and converting the properties to Ventas’ senior housing portfolio would add 1.2% to net operating income. Ventas isn’t the only senior housing REIT Bank of America likes, however. Welltower and American Healthcare REIT are also on the bank’s buy list. Both are dividend payers, with Welltower offering a yield of 2.3% and American Healthcare REIT touting a yield of more than 6%.