2 High-Yielding Health Care REITs Stay In Growth Mode

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After a year of underperformance in 2013, real estate investment trusts (REITs) have started off 2014 with a bang. IBD's Finance-Property REIT group is up 9% compared with a nearly 1% gain for the S&P 500.

The move is a bit counterintuitive amid the prospects for higher interest rates, but a couple of REITs are well positioned for growth thanks to an aging U.S. population and a rise in senior-citizen spending on health care.

S&P 500 componentHealth Care REIT ( HCN ), with a market capitalization of $18 billion, invests in health care and senior housing facilities in the U.S.

When the company reported Q4 results in February, funds from operations (FFO) rose 16% from a year ago to 99 cents a share. Revenue surged 59% to $788.6 million. Big revenue growth in recent quarters is a result of its 2012 acquisition of Sunrise Senior Living for $845 million.

Concurrent with its earnings release, Health Care REIT paid its 171st consecutive quarterly cash dividend of 79.5 cents a share, up 4% sequentially. It yields 5.1%. Q1 earnings are due May 8 before the open.

Omega Healthcare Investors ( OHI ), meanwhile, is smaller with a market capitalization of $4.3 billion, but fundamentals are solid here as well with seven straight quarters of double-digit bottom-line and top-line growth.

The company invests primarily in long-term health care facilities. At the end of 2013, Omega owned 538 facilities with a capacity of 61,178 beds in 37 states.

In 2013, annual return on equity hit an all-time high of 14.9%, an indication of a solid management team. Annual pretax margin was 41.2%.

On Friday, Omega raised its quarterly dividend for the seventh straight quarter to 50 cents a share, giving it a current yield of 5.8%. Q1 earnings are due April 29 after the close.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas

Referenced Stocks: HCN , OHI

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