Real estate investment trusts, or REITs, as they're called,
got massacred in the financial crisis in 2007 and 2008. The
Finance-Property REIT industry group lost more than
three-quarters of its collective value when the housing market
That should have disabused any income investor of the notion
they are "safe" stocks.
But REITs made a strong comeback, and despite the prospect of
rising interest rates, some are doing well.
REITs invest in property or mortgages. They avoid paying taxes
if they pay out most of their income as dividends. One REIT with
a good payout, offering growth and the possibility of further
capital appreciation, isOmega Healthcare Investors (
). It invests in long-term care facilities.
As of June 30, it had 477 skilled nursing facilities, assisted
living facilities and other specialty hospitals with 55,000
licensed beds in 33 states operated by 47 third-party operating
companies. The company says it plans to keep buying quality
properties operated by good managers.
It offers an annualized $1.92 a share as dividends, which
comes out to a 5.7% yield at the current share price near 33.
The stock is notable because it appears to be forming a base.
It has been moving higher over the past few years by advancing,
pausing to build a base, then advancing again.
On Oct. 15, the company announced a 1-cent quarterly dividend
increase to 48 cents a share. It will report quarterly results
Thursday after the close.
Dividend increases have become pretty common affairs at Omega.
In Q1 2004, the company paid out 18 cents, which was a payout
ratio of 77%. In the first quarter of 2013, it paid out 46 cents,
a 73% payout.
The company has demographics on its side. In 2000, 1.5% of the
population was 85 years old or more. By 2050, that number is
expected to be 5%.