Did you know that the average American's life expectancy has doubled since 1900? It's true. In 1900, the average American lived about 41 years, while today, you can expect to live to 80 years, on average. More than 40% of Americans are likely to reach 85 years old and beyond.
Two big areas of need for older people are healthcare and housing, so we asked three of our top experts to name a stock that could be a big winner due to the trend of longer lives. They gave us Wallgreens Boots Alliance Inc (NASDAQ:WBA), CVS Health Corp (NYSE:CVS), and Senior Housing Properties Trust (NASDAQ:DHC). Let's take a closer look at what they had to say about these three companies.
Selena Maranjian (Walgreens Boots Alliance): Life expectancies have been growing in many countries around the world, including the U.S. This presents many challenges, such as retirees needing to support their no-longer-working selves longer, and also many opportunities. For example, longer life expectancies can boost business prospects for many companies, such as Walgreens Boots Alliance Inc -- the world's largest drugstore chain.
As we age, we tend to develop medical conditions requiring healthcare products and services. Much of Walgreen's business serves aging people especially well, via over-the-counter medications, pharmacies, and clinics. The company has more than 12,000 locations globally and more than 400 clinics and employs more than 370,000 people. Beyond longer-living customers, Walgreen has other growth catalysts, such as its expansion abroad (evidenced by its merger last year with Europe's Alliance Boots) and Obamacare, which is providing millions of Americans with new healthcare, leading to more doctor visits and prescriptions to be filled.
Walgreen's CEO Stefano Pessina has plans for further acquisitions, and is targeting the U.S. in particular. Some would like to see it buy a pharmacy benefits manager, or PBM, to round out its offerings.
Walgreens Boots Alliance's stock may not be a screaming bargain at recent levels, but it's still poised to perform well over the long run. Its forward-looking P/E ratio is close to 20, just a bit above its five-year average of 18. Better still, it pays a dividend that recently yielded 1.6%, and it has been boosting its payout significantly in recent years, more than doubling it since 2010.
Jason Hall (CVS Health Corp): While Walgreens Boots is a dominant international chain, CVS Health is largely focused on growing its position as the largest pharmacy in the U.S. While America is pretty much full-up on physical pharmacy locations, CVS is taking an innovative approach to expand its business beyond traditional pharmacy and retail operations.
This includes the company's CVS/Caremark pharmacy benefit management and mail-order business, its specialty pharmacy business that delivers more complex treatments that patients can't just pick up at the local pharmacy. CVS Health -- and this is largely where the "Health" part of its name comes from -- is also expanding into the medical care business through its "Minute Clinic" locations, offering low-cost access to basic health services. Though these services are typically available at the family doctor, the intention of Minute Clinics is to make them more easily accessible and faster.
As more of the population lives longer, there will be an increased level of demand on the healthcare system. CVS Health's efforts to expand its services to help meet this burgeoning need, is not only good for customers and patients, but it should be a major boon for shareholders.
Dan Caplinger (Senior Housing Properties Trust): The trend toward longer lifespans means that senior citizens will live longer and potentially have greater demand for housing that's tailored to their particular physical condition and healthcare needs. One company that stands to benefit from that trend is Senior Housing Properties Trust, which is a real-estate investment trust that owns a wide variety of senior-oriented properties across the nation. The REIT includes independent living and assisted living communities, continuing care retirement communities, and full-blown skilled nursing facilities within its portfolio of properties. It also invests in some healthcare-related properties tied loosely to its overall specialty, including wellness centers, medical office buildings, and clinic and laboratory buildings. Although many of its facilities are concentrated in east of the Mississippi River, Senior Housing Properties Trust also has a strong presence in the central U.S. as well as in California.
The longer people live, the more likely it is that they'll need specialized housing, and Senior Housing Properties Trust has already achieved an attractive 7% dividend yield from its funds from operations. If results improve in the future, then the REIT should pay even higher dividends, rewarding shareholders for participating in the company's success. That makes Senior Housing Properties Trust worth a closer look in light of rising lifespans for today's retirees.