The demand for senior housing in Canada will continue to rise, especially over the next decade. The population of seniors aged 75 and older is expected to increase by 111.2% between 2014 and 2034, substantially boosting the need for senior housing and related services.
What’s more, the senior living market in Canada is anticipated to register a compound annual growth rate (CAGR) of approximately 5% from 2024 to 2029. This growth is driven by the aging population and the increasing demand for specialized housing and care facilities.
The rising demand for senior housing has attracted significant interest from investors and real estate developers, leading to increased capital flows and construction activity in the sector. And yet, the market for senior housing in Canada is relatively fragmented, with a mix of local, small developers and a few larger branded players. This is why the major leaders in the market should continue to see massive demand. Let’s look at why.
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Extendicare
First, we have Extendicare (TSX: EXE), which provides a range of services, including long-term care, home health care, and retirement living. This diversification allows the company to capture different segments of the senior care market, providing stability and multiple revenue streams.
Extendicare has been strengthening its portfolio through acquisitions, such as its partnership with Sabra Health Care REIT to sell 11 senior living assets. This expansion increases its market share and ability to meet rising demand. Furthermore, Extendicare benefits from government contracts and subsidies for long-term care, ensuring a steady revenue stream and support for expansion projects.
Then there are the current reasons to invest. Extendicare’s earnings per share (EPS) have shown a remarkable increase, while revenue increased to $367.1 million in the first quarter (Q1) of 2024. This was driven by higher long-term-care funding, improved occupancy rates, and growth in home health care services. Net operating income (NOI) saw a modest increase to $44.7 million despite higher operating costs. So, with a 6.23% dividend yield, improving finances, and a strong market, Extendicare stock certainly looks promising.
Sienna Senior Living
Next, we have Sienna Senior Living (TSX: SIA), which focuses on high-quality private-pay retirement properties and long-term care. The acquisition of private-pay retirement assets boosts its profitability and positions it well to cater to affluent seniors seeking premium services.
Sienna’s strategic partnerships, such as with Sabra Health Care REIT as well as through a joint venture, enable it to expand its footprint and enhance service offerings. This allows Sienna to capitalize on the increasing demand for senior living facilities. Sienna’s focus on operational efficiency and improving occupancy rates helps it manage costs and enhance profitability, making it well-positioned to benefit from the growing demand for senior housing.
As for earnings, Sienna’s EPS has shown some volatility, with a notable increase in the most recent period. Total adjusted revenue for Q1 2024 increased by as well, and total NOI increased by 74.9% to $63.5 million, driven by government funding and operational improvements. Meanwhile, it holds a 5.9% dividend yield for investors to consider.
Chartwell Retirement Residences
Finally, we saved the biggest for last. Chartwell Retirement Residences (TSX: CHP.UN) is one of the largest operators of retirement residences in Canada. Chartwell benefits from economies of scale and a strong brand reputation. This positions it well to attract a large share of the growing senior population.
Chartwell’s integrated service model includes independent living, assisted living, and memory care. This allows it to cater to a wide range of senior needs, increasing its market appeal. Furthermore, its investment in modern facilities and amenities aligns with the growing consumer demand for high-quality, community-oriented living spaces. This enhances its attractiveness to potential residents and supports higher occupancy rates.
As to its earnings, Chartwell’s EPS has experienced volatility. However, net income has seen impressive growth, particularly in 2022 and again in 2023. Resident revenue increased by $18.1 million (10.9%) in Q1 2024, and same-property adjusted NOI increased by 24.7%. And with a dividend yield of 5.35%, it certainly deserves your attention.
Bottom line
The increasing demand for senior housing in Canada presents significant growth opportunities, especially for Extendicare, Sienna Senior Living, Chartwell Retirement Residences and, of course, those investing in them. Altogether, Extendicare, Sienna Senior Living, and Chartwell are in strong positions to thrive in the growing senior housing market in Canada.
