2. Omega Healthcare Investors Inc (NYSE:OHI)
Another big-dividend investment that we consider more attractive than Prospect is Omega Healthcare Investors Inc (NYSE:OHI), and in this case we actually do own OHI. It yields 7.7%, and has much more price appreciation potential than Prospect Capital, in our view. Our basic thesis on OHI is that it has been overly beat up (we are contrarians) as REITs sold off in recent months (due to rising interest rate fears) and as healthcare stocks have sold off (investors have been particularly fearful of OHI’s exposure to skilled nursing facilities, especially considering the uncertainty surrounding the future of the Affordable Care Act). We believes REITs have sold off too much, we may be about to get more clarity on healthcare laws (the market hates uncertainty), and Omega Healthcare Investors Inc (NYSE:OHI) is an attractive alternative to Prospect.
Follow Omega Healthcare Investors Inc (NYSE:OHI)
Follow Omega Healthcare Investors Inc (NYSE:OHI)
3. Diversified Real Asset Income Fund of Beneficial Interest (NYSE:DRA)
Sticking with the REIT/real asset theme, we believe Nuveen’s Diversified Real Asset Income Fund of Beneficial Interest (NYSE:DRA) is an attractive alternative to Prospect Capital because it offers a big 8.3% yield (paid monthly), and it has significant upside potential. The fund invests across the capital structure mainly in common stocks, preferred stocks and corporate bonds, and it focuses on infrastructure and real estate securities. Its objective is to provide current income and long-term capital appreciation. And not only do we like the sector exposures from a contrarian standpoint (real estate as measured by ETF XLRE, and utilities/infrastructure as measured by ETF XLU), but it currently trades at a compelling discount (-12.9%) to its net asset value.
Follow Diversified Real Asset Income Fund (ASX:DRA)
Follow Diversified Real Asset Income Fund (ASX:DRA)
Conclusion:
We sold our shares of Prospect Capital out of our Blue Harbinger High Income Equity portfolio last week, NOT because we believe it is at risk of imminent collapse (we don’t believe it is), but because we do believe it faces increasing risks from the market cycle, new regulations, a frothier valuation, and a challenging dividend coverage ratio, and because we believe there are healthier big dividend investment opportunities available such as EPR Properties, Omega Healthcare Investors, and Nuveen’s Diversified Real Asset Income Fund. In fact, we like Omega Healthcare and the Diversified Real Asset Income Fund so much that we’ve ranked them #6 and #7 on our list of 10 Big Dividends Worth Considering because we consider them healthier and more attractive investments for a long-term, diversified, income-focused investment portfolio than Prospect Capital.
Note: This article was written by Blue Harbinger. At Blue Harbinger, our mission is to help you identify exceptional investment opportunities while avoiding the high costs and conflicts of interest that are prevalent throughout the industry. We offer additional free reports and a premium subscription service at BlueHarbinger.com. If you are ever in the Naperville, IL, USA area, our founder (Mark D. Hines) is happy to meet you at a local coffeehouse to talk about investments. Please feel free to get in touch.
