Investors have any number of options for doing good while investing thanks to the growth of ESG (environmental, social, governance) options. However, if you are looking to take a more direct approach to making the world a better place, you'll want to look at Omega Healthcare Investors (OHI 1.47%) and Welltower (WELL 0.56%). These two healthcare real estate investment trusts (REITs) literally own the properties that help people live better lives.

The big picture

The first thing to consider is demographics. Older people generally need more medical care than younger people. The number of older people in developed countries around the world is increasing. And the pace of this increase is set to climb materially.

To put that into numbers, in the U.S. those 65 and older made up roughly 17% of the population in 2020, but that number is expected to grow to 22% by 2040. That sounds like a small shift, but it means nearly 25 million more people will be 65 and up during the next 20 years.

Of note, the 80-and-older age group, which is the most likely to need additional care, is set to go from a historical annual growth rate of about 1.3% to a growth rate of 3.6% between 2020 and 2040. Step back and think about that. The growth rate of the age group most in need of a senior housing facility or nursing home is set to more than double. That's a huge tailwind for REITs that own these assets.

1. Omega Healthcare Investors: Helping the oldest

Omega Healthcare Investors owns 938 senior housing properties across the U.S. and U.K. Roughly 75% of its rents come from nursing homes, which provide the most care, with the rest coming from senior housing. The company's dividend yield is a huge 9.7%. Although the dividend has not been increased in several years, it also hasn't been cut, even in the face of coronavirus pandemic headwinds. 

That said, the company is currently working with a number of tenants who are struggling, and there is a risk of a dividend cut. Adjusted funds from operations (FFO) was $0.74 per share in the first quarter of 2022, while the dividend was $0.67 per share, leading to a payout ratio of 90%, which is kind of high.

However, with such a high yield, the risk of a cut could be one worth taking on, given that even a 50% dividend reduction would leave investors with a well-above-market yield. The key here is to remember that increased demand is on the way even as the uncertainty surrounding the coronavirus pandemic continues to wane, which will support a long-term recovery.

2. Welltower: A diversified approach

For investors with a lower appetite for risk, Welltower could be a stronger option. This REIT generates 62% of its rent roll from senior housing assets, 24% from medical office buildings, 9% from health systems, and the remainder from other healthcare assets. Just over one-third of assets aren't senior housing, which provide some balance to the portfolio. It's worth noting that medical-office assets held up particularly well during the pandemic.

That said, roughly 40% of its rents come from senior housing assets that Welltower both owns and operates, known as senior housing operating assets (SHOP) in the industry. Essentially, these facilities' financial results flow directly through to the REIT's top and bottom lines. That was a bad thing during the pandemic and led to a dividend cut.

However, as the world gets used to living with the coronavirus, these assets should recover and Welltower's results are, effectively, leveraged to a rebound. It is highly likely that the dividend will start to head higher again when that upturn takes place. The current yield is 3.1%.

Long-term plays

Both Omega and Welltower investors need to go in understanding that these are investments that will play out over decades, not days. So only long-term income investors should be looking at either of these senior housing REITs. However, as they make the lives of residents better, you will likely find that your financial situation gets better too.