Mid-Cap REITs With A Dividend Yield Over 5%

Published Mon, 20 Jun 2016 12:45 CET by DividendYields.org

Real Estate Investment Trusts (REITs) allow you to invest in portfolios of large-scale properties by purchasing the relevant stocks. As a REIT stockholder, you can benefit from income investing in the real estate market, without actually owning a finance property.
In fact, owning and operating real estate requires thorough knowledge and patience, along with the danger of being highly leveraged and illiquid. This means that you cannot sell your property immediately for cash, plus you have to be able to evaluate your property and know how to calculated an annual return on investment. On the other hand, REITs offer you the benefits of owning equity through purchasing on the stock market.

This article discusses three mid-cap REITs that trade in the REIT - Healthcare Facilities Industry. All three stocks trade on the NYSE, on average 5% lower than their 52w-high (EPR Properties is currently trading at it’s 52w highest price). Their average dividend yield is 6.19% at an average payout ratio of 144%. REITs are forced by the law to distribute at least 90% of their retained earnings to their shareholders, therefore, high payout ratios are normal for this particular industry. Their average debt-to-equity ratio is 1.01 and their average beta is 0.72, representing low-risk stocks.

Corrections Corp Of America, EPR Properties and Omega Healthcare Investors YTD Stock Performance Graph
Corrections Corp Of America (NYSE: CXW) is a Nashville, Tennessee-based company that owns and operates privatized correctional and detention facilities on a federal, state, and local level in the United States. CCA provides inmate residential and prisoner transportation services for governmental agencies as well as a range of rehabilitation and educational programs, including basic education, religious services, employment training, and substance abuse treatment, among others.

Q1 2016 Results: CCA’s first quarter 2016 results are mainly affected by the decline in inmate California population, the startup expenses at the Trousdale facility, and the short-term debt refinancing with long-term debt in Q3 2015. Revenues reached $447.4 million, up 5.0% YoY from $426.0 million, generating a gross profit margin of 29.8%, 1.4% higher than 29.4% in the same quarter last year. Total operating expenses grew 7.1% YoY to $382.5 million from $357.2 million. Operating income declined 5.7% YoY to $64.9 million from $68.8 million, generating a net income of $46.3 million, down 19.2% YoY from $57.3 million. On the upside, operating cash flow for the quarter grew 2.7% YoY to $120.3 million from $117.2 million.

Dividend Growth: On May 13, CCA declared a quarterly dividend of $0.54 per share, thereby reaching an annualized dividend of $2.16, yielding 6.42% at a payout ratio 121%. The payout ratio is in line with the average payout ratio 127.2% of the Real Estate Investment Trusts Industry in the fourth quarter of 2015, and lower than the average payout ratio 204.6% of the first quarter of 2016. CCA’s dividend growth since 2002 is 170.0% or 42.5% annually.

The Bottom Line: CCA’s balance sheet remains strong with 3.6 times leverage and 6.2 times fixed charge coverage. In the end of the third quarter of 2016, the company had free cash flow $55 million and no debt maturities through 2020. CCA will continue to identify and pursue acquisition targets that could boost its growth and complement its company’s existing platform. In addition, CCA focuses on returning shareholder value through accretive acquisitions that offer a competitive edge in regards to available capacity – currently over 9,000 beds. Through 2017, analysts estimate an average EPS of $1.89, up 5.9% from current EPS of $1.78, and an average DPS of $2.16. The expected payout ratio is 114%. Average earnings growth is estimated at 6% annually through 2020.

EPR Properties (NYSE: EPR) is a Kansas City, Missouri-based real estate investment trust that runs its operations in the real estate markets of the United States and Canada. EPR Properties engages in the development, ownership, leasing and financing of properties in selected market segments, primarily in the entertainment, education and recreation industries.

Q1 2016 Results: In the first quarter of 2016, ERP Properties delivered strong results, maintaining strong operational performance. The company’s funds from operations (FFO) grew 130% to $73.8 million from $32.1 million in the first quarter of 2015, thereby generating an FFO per share of $1.17 compared to $0.56 in the prior quarter, an increase of 109%. More specifically, compared to the first quarter of 2015, EPR’s results are as follows:

  • Revenues up 19.4% YoY to $118.8 million from $99.4 million
  • Gross profit margin up 1.9% YoY to 95.4% from 93.6%
  • Total operating expenses down 22.4% YoY to $41.7 million from $53.7 million
  • Operating income up 68.5% YoY to $77.1 million from $45.8 million
  • Net income up 26.5% YoY to $54.2 million from $42.8 million
  • Operating cash flow $69.1 million from $57.5 million, 20.1% growth

Dividend Growth & Prospects: On May 19, ERP Properties declared a monthly dividend of $0.32 per share, thereby reaching an annualized dividend of $3.84 per share, yielding 5.18% at a payout ratio of 126%. The dividend of $0.32 per share represents an increase of 5.8% from the previous year. In addition, dividend growth since 2013 is 21.5% or 7.2% annually.

The Bottom Line: ERP Properties is expected to capitalize on improved customer service in the markets it serves and especially in the education and recreation sectors. Solid demand for properties is expected to drive the company’s profitability in the coming quarters and generate shareholder value. Through 2017, average EPS is estimated at $3.23, 6.0% higher than current EPS of $3.05 and average DPS is estimated at $4.06, 5.7% higher than current DPS of $3.84. The expected payout ratio is 126%. The 5-year earnings growth is estimated at 6.24% annually.

Name Price ($) 52 wk low 52 wk high 52 wk low % 52 wk high % Market Cap ($ b) P/E D/E Beta Payout Ratio
Corrections Corp Of America 33.90 24.21 35.48 40.02% -4.45% 3.95 18.89 0.97 1.06 121%
EPR Properties 74.47 49.24 74.47 51.24% 0% 4.72 24.29 0.91 0.61 126%
Omega Healthcare Investors 32.90 26.96 37.24 22.03% -11.65% 6.18 26.09 1.14 0.48 184%

Omega Healthcare Investors (NYSE: OHI) is a Maryland-headquartered real estate investment firm that operates in the real estate markets of United States. Omega Healthcare Investors invests primarily in long-term healthcare facilities and maintains a strong investment portfolio.

Q1 2016 Results: In the first quarter of 2016, Omega Healthcare Investors indicated strong operational performance and profitability. The company’s FFO grew 93% to $153.6 million from $79.6 million in the same quarter last year, generating an FFO per share $0.77 compared to $0.59 per share in the first quarter of 2015, a 31% increase. Revenues reached $212.9 million from $133.4 million, a 59.6% YoY increase. Operating income grew 12.3% YoY to $96.5 million from $86.0 million, generating a net income of $55.6 million, up 29.0% YoY from $43.1 million. On the downside, total operating expenses grew 145.1% YoY to $116.3 million from $47.5 million, but operating cash flow was strong, up 23.1% YoY to $127.2 million from $123.3 million in the same quarter last year.

Dividend Growth & Prospects: On April 14, Omega Healthcare Investors declared a quarterly dividend of $0.58 per share, thereby reaching an annualized dividend of $2.32 per share. The dividend yield is 7.06% and the payout ratio 184%. The stock’s dividend growth since 2000 is 132.0% or 8.3%, indicating a company that sustainably returns value to its shareholders.

The Bottom Line: Omega Healthcare Investors is expected to continue investing in new assets. In the first quarter of 2016, the company completed $31 million of capital expenditures and $494 million of new investments - five separate purchase lease transactions of $437 million and two mezzanine loan investments of $57 million. Through 2017, analysts estimate an average EPS of $1.83, up 44.8% from current EPS of $1.23 and an average dividend per share of $2.46, increased 5.9% from current DPS of $2.32. The expected payout ratio is estimated at 134%, whereas the average earnings growth through 2020 is estimated at 2.93% annually.


Stock name Dividend Yield
Corecivic 8.05
Omega Healthcare Investors 6.98
Epr Properties 6.20

Articles featuring Corecivic (CXW):

Our Intelligently Diversified High Yield REIT Portfolio Designed For Outperformance

On July 1st 2016, we commenced trading in 2CHYP, our high yield REIT portfolio, with the explicit goal of maximizing total return. This article will detail the holdings of 2CHYP heading into the 4th quarter along with the diversification, high yield and deep value of the portfolio in absolute terms and relative to the index. First, however, I want to discuss why maximizing total returns was chosen as the goal for this portfolio and how intelligent diversification is crucial to achieving this... Read more

Tweaking My REIT Yield-Hog Screen For Better 'Distribution Quality'

In a 7/5/18 blog post, I introduced a Real Estate Investment Trust (REIT) yield-hog screen. Obviously, it seeks high yields. Less obviously but more important, it first carefully prequalifies the candidates by eliminating REITs I deem most vulnerable to outsized distribution cuts by considering REIT cash on cash return and leverage. But upon using the screen in practice, I discovered a hitch which I address here through a revision. The Recipe Most of the model is exactly as it originally... Read more

Our High Yield REIT Portfolio Designed For Outperformance

REITs have been quite disappointing with a 2 year return of just 5.65% which represents less than 2 years of dividends. Source: SNL Financial Returns this low are just not enough and we refuse to accept the inevitability of low returns that so many pundits are describing. Frankly, REIT returns have been low because the index consists primarily of large caps with bloated valuations. Through an active approach, we can own more of the good stuff and avoid the overvalued names that... Read more

Screening To Shield REIT Yield Hogs From The Butcher's Knife

Income investors know all too well, especially in today’s still-stingy environment, that high yields typically come with high, often too-high as it turns out, risks. But there are “inefficiencies” to be found, especially with Real Estate Investment Trusts (REITs), where Mr. Market often waffles between seeing stock-like securities or ownership interests in real estate. This opens up opportunities for venturesome income-seekers to find unexpectedly high yields on unexpectedly... Read more

Our High Yield, Value REIT Portfolio Designed For Outperformance

Investing in REITs provides a higher dividend yield compared to the broader market and with the recent underperformance, REITs also provide a better value. Buying the REIT index, however, would involve buying the bad REITs along with the good ones. Instead, I prefer to amplify and maximize the benefits of REIT investing through a hand-selected, diversified portfolio of REITs that are individually and collectively positioned to outperform. We call this portfolio 2CHYP. Although 2CHYP... Read more