Long-Term care facilities
Omega Healthcare Investors Inc (NYSE:OHI) owns and operates long-term healthcare facilities in the United States. The company has a forward P/E ratio of 12.06 and a dividend yield 5.70%.
Omega Healthcare Investors Inc (NYSE:OHI) grew revenue over 20% from the same quarter one year ago, outpacing the industry average of 9.6%. With Earnings Per Share (EPS) growth of 36%, the company is very effective at transforming revenue into profit.
Omega Healthcare Investors Inc (NYSE:OHI) also operates a very profitable business with a gross profit margin of 63.40%, outpacing its peers by nearly 30%. The company is also extremely successful at generating cash flow. They currently sport a free cash flow yield of 47.65%. This ratio shows that almost half of all the cash flow generated by Omega Healthcare Investors Inc (NYSE:OHI) is free to return to shareholders. This ratio shows that Omega’s dividend has tons of room to grow moving forward. That coupled with the aging US population makes Omega a great long term buy.
Another play for long term healthcare facilities is Health Care REIT, Inc. (NYSE:HCN). The company was founded in 1970 and manages over $20 billion in properties.
Health Care REIT, Inc. (NYSE:HCN) has paid 168 consecutive dividends. The company has a forward P/E of 16.20 and a dividend yield of 4.50%. Health Care REIT grew revenue over 29% from the same quarter one year ago, outpacing the industry average of 10.1%. This revenue growth has flow through to the bottom line as the company reported EPS growth of 46.1%.
Health Care REIT is also very good at generating cash from its operations. The company grew its net operating cash flow over 49% from the same quarter one year ago. One area people may be concerned with for Health Care REIT, Inc. (NYSE:HCN) is the fact that the price has run up a little bit lately. The company’s stock is up over 30% over the past year is slightly expensive in comparison to other companies in this sector. I feel this price appreciation is warranted due to Health Care REIT, Inc. (NYSE:HCN)’s tremendous operations and feel the company is a great long term buy even at slightly pricey multiples.
Wrap Up
If you don’t understand how a business is operating how can you truly determine its value? When it comes to long term investments I feel that it is best to keep it simple. What is simpler then owning and leasing real estate?
These three companies also have the luxury of locking in long term cash flow by having their residents sign long term leases. (Government Properties Income Trust (NYSE:GOV)’s average new lease term is 26 years) After being beaten down over the last few weeks investors have been presented with a nice buying opportunity. Whose doesn’t love buying great companies at a discount? I know I do.
Daniel Paterson has no position in any stocks mentioned. The Motley Fool recommends Health Care REIT.
The article 3 Simple REITs With Great Yields originally appeared on Fool.com.
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