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 (
), 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 (
), 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
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.