"Under the Radar" is a daily feature that uncovers little-known companies worthy of investors' consideration. Check in at 5 every morning to find out about stocks that tend to beat their bigger brethren.
BOSTON (TheStreet) -- Investors' aversion to housing clobbered real estate investment trusts in 2008. The Dow Jones REIT Index has fallen 39% over the past year, but is up 82% from its March low. REITs trade like stocks but are ideal for income-oriented investors because of their hefty cash payouts. Here are a few to consider.
Hunt Valley, Maryland-based Omega Healthcare Investors (OHI) owns income-producing health-care, assisted living and rehabilitation facilities in the U.S. As baby boomers age and health-care costs rise, Omega will enjoy steady profit growth.
Second-quarter net income grew 16% to $20 million and earnings per share jumped 5% to 21 cents, restrained by a higher share count, as revenue increased 12% to $49 million. The operating margin inched down to 60% and the net margin rose from 39% to 40%.The company holds less than $12 million of cash reserves, compared to $530 million of debt and $9.2 million of quarterly interest expenses. But weak liquidity is common for REITs. And Omega's debt-to-equity ratio of 0.7 is less than the industry average, a sign of fiscal prudence. Omega has advanced 10% in 2009, outpacing the Dow Jones Industrial Average, but underperforming the S&P 500 Index. The stock trades at a price-to-earnings ratio of 18, indicating parity with the overall market, but a sizable discount to peers. Omega's obvious selling point is its 6.8% dividend yield. REITs are structured differently than corporations and, consequently, their earnings distributions are large, but subject to different taxation laws. Nevertheless, the yield is attractive and sustainable. Omega has an impressive record of dividend increases.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV