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Tuesday July 03, 2012
Income REITS: Retail and healthcare
by Brian Hicks, editor Wealth Advisory Here, we review two income plays in our model portfolio. Realty Income Corp. (O) remains a favorite of income investors. It owns retail space, which it leases to big-name retailers. Omega Healthcare Investors (OHI) is high-yielding play on an aging population. Since going public in 1994, Realty Income -- yielding in the neighborhood of 8% -- has provided shareholders with a compounded average annual return of 17.3%. Leases typically run 15-20 years, and the company has an occupancy rate around 97%. And the fact that it has virtually no exposure to Europe is an important bonus. But it's not just retail – the company has 136 tenants representing 38 different industries. You can expect stability and steady dividend growth from this stock. Meanwhile, Omega Healthcare is high-yielding play on an aging population. The stock has also managed to add a solid 10% so far in 2012 – and it's already on pace to handily outperform the S&P 500. Omega is not a fast growing company; in fact growth will only be 5% a year for the next five years. But with a forward P/E of 9, the stock is cheap. As always, with a relatively high-yielding stock, it's a good idea to ponder why the dividend is high and the valuation low. In the case of Omega Healthcare, it's likely that investors may be concerned about Medicare reimbursements. While it's impossible to know what Congress will do, we can be sure that Medicare cuts will not be popular. What's more, insiders at Omega have not sold a single share of stock in the last year. We might conclude that they are not worried about future reimbursements. Learn more about this financial newsletter at Brian Hicks' Wealth Advisory. Related articles: 
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