Omega Recommendation

Dear Mr. Berko: I just got a $17,300 tax refund, and I need help investing this money. I’m willing to take some modest risks to get a higher return; I’d like to get 6 or 8 percent. However, my stockbroker is so afraid of making a bad recommendation that he won’t endorse anything that isn’t recommended by his firm. But his firm hasn’t done well, as my managed account was down 9.78 percent last year and is down 3.2 percent so far in 2016. Last year, on his firm’s recommendation, we bought Apple, Macy’s, FMC and Owens-Illinois, which were disastrous. I would appreciate your recommendation for an income stock that you like. We bought AT&T, Buckeye Partners and Philip Morris last year on your recommendation, and they were good ones. But we had to buy them in a non-managed account so it wouldn’t “conflict” with our broker’s “management style and results.” Please help. — KC, Oklahoma City

Dear KC: In the past year, more people have lost money reaching for yields than standing behind a cash register while looking down the barrel of a Colt or a Smith & Wesson. And unless this broker has one of those things pointed at your head or possesses some compromising photos, it’s time to change advisers. So get rid of him quickly, because he’s dangerous to your wealth. And changing advisers or brokers is really a very simple procedure. Once you find a broker with whom you are comfortable, all you need to do is sign a simple transfer form. Within a few days of your signing that form, your portfolio will be electronically transferred to the new broker. No muss, no fuss and little bother. And if you prefer not to tell that broker you are leaving, you don’t need to say a word to him. Just do it.

Now take a look at Omega Healthcare Investors (OHI-$34.50). This is one of those special real estate investment trusts that have rewarded shareholders with increasing dividends. This REIT’s dividend went from 18 cents a quarter in 2003 to 58 cents a quarter last year. And in that time frame, shares went from $3 to the mid-$40s. OHI’s dividend, now at 60 cents a quarter, trades with an attractive yield of 6.9 percent. It’s a dividend that I believe will be raised again next year.

OHI, founded in 1992, provides capital and financing to its portfolio of over 900 long-term care properties — with a specific emphasis on skilled nursing facilities — in 42 states. Management has grown revenues from $101 million in 2003 to an estimated $851 million this year. Certainly, CEO C. Taylor Pickett, CFO Bob Stephenson and COO Daniel J. Booth have done a yeoman’s job of running this company. OHI’s capable management has put its competition to shame. OHI’s return on assets is 3.6 percent, versus the 2 percent industry average. Return on equity is 8.7 percent, versus the industry’s 4.3 percent. Operating margins are 51.3 percent, versus 26.9 percent. Net margins are 28.8 percent, versus 23.7 percent. The price-earnings ratio is 25-to-1, versus 43-to-1. Revenue growth (three-year average) is 28.5 percent, versus 17.3 percent. And net income growth (three-year average) is 23 percent, versus minus 2.6 percent. So compared with the industry’s benchmark numbers, OHI appears to have a formidable record. And Wall Street believes that revenues and earnings will be nicely higher this year.

However, I must tell you that some brokerages don’t like this stock. Charles Schwab doesn’t care a whit for OHI. Market Edge recommends “avoiding” the stock. Ned Davis Research is neutral. And Bank of America Merrill Lynch gives it an “underperform” rating. (BofA/Merrill is now allowed to use the word “sell” when analyzing stocks.) And though Vanguard, BlackRock, J.P. Morgan, Invesco, Cohen & Steers and State Street own about 80 percent of OHI’s shares, only Jefferies and JMP Securities have “buy” recommendations on the stock. However, next year’s median target price is $42.50. If you decided to buy OHI, you might be able to earn a 20 percent principal gain during the coming dozen months and enjoy getting a 6.9 percent dividend (or higher) while you wait.

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.


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Drew Limsky

Drew Limsky



Drew Limsky joined Lifestyle Media Group in August 2020 as Editor-in-Chief of South Florida Business & Wealth. His first issue of SFBW, October 2020, heralded a reimagined structure, with new content categories and a slew of fresh visual themes. “As sort of a cross between Forbes and Robb Report, with a dash of GQ and Vogue,” Limsky says, “SFBW reflects South Florida’s increasingly sophisticated and dynamic business and cultural landscape.”

Limsky, an avid traveler, swimmer and film buff who holds a law degree and Ph.D. from New York University, likes to say, “I’m a doctor, but I can’t operate—except on your brand.” He wrote his dissertation on the nonfiction work of Joan Didion. Prior to that, Limsky received his B.A. in English, summa cum laude, from Emory University and earned his M.A. in literature at American University in connection with a Masters Scholar Award fellowship.

Limsky came to SFBW at the apex of a storied career in journalism and publishing that includes six previous lead editorial roles, including for some of the world’s best-known brands. He served as global editor-in-chief of Lexus magazine, founding editor-in-chief of custom lifestyle magazines for Cadillac and Holland America Line, and was the founding editor-in-chief of Modern Luxury Interiors South Florida. He also was the executive editor for B2B magazines for Acura and Honda Financial Services, and he served as travel editor for Conde Nast. Magazines under Limsky’s editorship have garnered more than 75 industry awards.

He has also written for many of the country’s top newspapers and magazines, including The New York Times, Washington Post, Los Angeles Times, Miami Herald, Boston Globe, USA Today, Worth, Robb Report, Afar, Time Out New York, National Geographic Traveler, Men’s Journal, Ritz-Carlton, Elite Traveler, Florida Design, Metropolis and Architectural Digest Mexico. His other clients have included Four Seasons, Acqualina Resort & Residences, Yahoo!, American Airlines, Wynn, Douglas Elliman and Corcoran. As an adjunct assistant professor, Limsky has taught journalism, film and creative writing at the City University of New York, Pace University, American University and other colleges.