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Wednesday May 09, 2012
Senior housing reits for income
by Brian Hicks, editor Wealth Advisory Omega Healthcare Investors (OHI) and Medical Properties Trust (MPW) caters to the senior housing/assisted living facilities. Given the growing senior population, it makes sense to be somewhat over-exposed to companies that target this market. With a yield of nearly 8%, and a valuation that's equivalent or cheaper than its competitors, investors can feel pretty good about Omega Healthcare. The stock has traded between $20 and $22 this year. It dipped as low as $16 at the lows last October. Due to its relatively low earnings growth rate, there's probably not a lot of upside for the share price. But the large dividend is the payoff here. The risk for Omega Healthcare is regulatory. Any reduction in Medicare/Medicaid reimbursements will be bad for the stock. And by bad, I mean we would exit this position immediately. For now, though, reimbursement changes don't seem to be on the table now, and probably won't be in an election year. Medical Properties is smaller than Omega, but has a lower valuation and better earnings growth potential. And Medical Properties pays 9%, as opposed to 8% for Omega. New money should probably start with Medical Properties Trust, as it's the best value of these two stocks. Learn more about this financial newsletter at Brian Hicks' Wealth Advisory. Related articles: 
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