Omega Heathcare: A healthy REIT

Contrarian investor David Dreman owns more than 1 million shares of this healthcare REIT.

By TheStockAdvisors Apr 19, 2012 8:50AM
By Mark Skousen, High-Income Alert

Omega Heathcare Investors (OHI), based in Hunt Valley, Md., is a real estate investment trust (REIT) that provides financing and capital to the long-term healthcare industry, especially skilled nursing facilities.

The company owns or holds mortgages on more than 400 assisted living facilities, nursing homes and specialty hospitals in 35 states. A REIT must pay out at least 90% of its net cash flow in the form of dividends. So, we get an attractive yield here of 8%.

Not only is the yield sustainable, it should grow substantially from here. For the past five years, Omega has boosted its dividend an average of 10% per year. That's five times the rate of the average healthcare REIT.

Some observers will argue that with Medicare reform ahead, a healthcare REIT isn't a good place to invest. I disagree.

With the population greying -- and living longer -- nursing homes and assisted living facilities are going to see a steady influx of business in the years ahead.

One person who agrees with me is the outstanding contrarian investor David Dreman. He owns more than 1 million shares of Omega Healthcare in his DWS Dreman Small-Cap Value Fund.

Why does this market-beating manager own the stock? Only Dreman can say. But note that quarterly earnings at Omega are up 288% on a 13% increase in revenue.

Operating margins top 56%. And the company is in the midst of a $100-million stock buyback program. As a result, now is a good time to take advantage of this low share price and high yield.

Related articles:
Tags: OHIREIT
0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

122
122 rated 1
288
288 rated 2
472
472 rated 3
638
638 rated 4
628
628 rated 5
704
704 rated 6
609
609 rated 7
489
489 rated 8
275
275 rated 9
129
129 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
AAPLAPPLE Inc10
ATVIACTIVISION BLIZZARD Inc10
CTSHCOGNIZANT TECHNOLOGY SOLUTIONS10
FOXATWENTY-FIRST CENTURY FOX Inc CLASS A10
ITUBITAU UNIBANCO BANCO MULTIPLO S.A.10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.