With the presidency of Donald Trump, there has been a steady growth of news that interest rates will rise. The rates even jumped the first week of his presidency. Dividend stocks also have taken a slight drop. Why would people want to invest in dividend stocks when they can get the same interest rate in the bank account?
Well, it will be a while before your bank will give you a similar rate if ever. Most banks are giving 1% or less in the savings account. Even with rising interest rates, I highly doubt that you will see rates rise to a point where it makes sense to move your monies from stocks.
Today, I want you to look at a couple REITs both in the industry of senior housing care. Both are under the radar with good reason. First, their prices have dipped as people expect interest rates to rise. Again, I don’t expect big jump in interest rates. This also has caused their prices to drop recently and it gives better reason to start investing in them. I do think that an increase in December rates maybe the BEST time to get in.
Why invest in Senior Healthcare Facilities?
First, the baby boomers are getting into retirement age. They don’t need a house anymore. The kids are out. They want community still and most importantly they want nursing care to live out their senior years. This is an industry that will be a great investment for many years.
Second, they pay a nice dividend that I expect will continue to increase. OHI, Omega Healthcare Investors, offers a 8% dividend. The stock has dropped from $38 to less than $29 in the past year. This means you get a substantial discount on a dividend that will keep on giving. The CEO has bought stock recently which is a great sign. Scott Black, the president and founder of the Delphi Management fund, has also purchased into this company. This company gets lots of revenue from Government sponsored programs like Medicare. If you expect a cut in these sponsored programs, it may not be a good stock to invest in. With a market cap over $5 billion, I believe this is a fairly stable stock that will continue to pay forward.
The second company is a more risky REIT that was recently spin-off in 2015. It offers a bigger dividend than OHI and I believe it has plenty of reward vs risk. It was once a $20 stock but now trades at 50% that price offering a nice discount. It also offers a 10% dividend at today’s rates. The stock is New Senior Investment Group with stock symbol SNR. With a market cap of less than $1 billion, there isn’t much coverage nor many funds that want to get into this one.
I believe this gives you more risk but the 10% dividend and for the smaller investor you can get into a stock with a substantial discount with plenty of upside. It did recently miss on revenue estimates. However, SNR gets all of it revenue from private payments. It doesn’t get affected by government sponsored programs. You don’t get the risk of the government cutting the program and you know that baby boomers will pay for the care.
Both of these stocks look like good plays for future investment. I expect the december rate hikes that I assume will happen will be a great time to get in one or both of these stocks. Please do your due diligence and research.
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