Follow CEO Into Medical REIT And Score Fat Dividend Tomorrow

Despite long-term interest rates continuing to creep higher, real estate investment trusts were the best performing group among income-producing equities last week. Bouncing from oversold conditions, the iShares Cohen & Steers REIT (ICF +4.2%) turned in the top weekly performance in the group; the iShares Mortgage Real Estate Capped (REM +3.0%) was also above average.

Here is a health care REIT with an ex-dividend date tomorrow for a payout of $0.71 per share. The dividend is yours if you own shares of Universal Health Realty Income Trust (UHT) by today’s market close. You wouldn’t be in bad company buying this stock. The CEO has personally purchased 4,000 shares in the past seven days. See below for details on the buy write in which we write October calls.

Please email me ([email protected]) at any time with questions about how to use Forbes Premium Income Report. — J.D.

Universal Health Realty Income Trust (UHT) – Buy Write

Buy 100
100
UHT

Sell to Open 1 October 21 $50 Call

Execute for Net Debit of $47.75 or lower

King Of Prussia, Pa.-based Universal Health Realty Income Trust (UHT) owns buildings that are used to house healthcare and human service-related facilities. The real estate investment trust invests in properties that include hospitals, behavioral health facilities, rehabilitation centers, surgery centers, childcare centers, and medical office buildings. UHT owns interests in 76 properties in 21 states, with a concentration in Arizona, NevadaNEVADA
and Texas.

OverOVER
the past three years, revenue has grown 3.6% annually, and funds from operations have compounded 3.2% annually. UHT trades at a 27% discount to its five-year average enterprise value/Ebitda multiple.

Tomorrow’s dividend and the recent insider purchase of UHT emboldens a buy write, even though there is scant liquidity in the options. As long as you place your order with a net debit, that is the maximum amount you will pay—very similar to a limit order.

Here is the buy write: Buy 100 shares of UHT, and sell to open one contract of $50 October 21 calls. Use a net debit of $47.75 or lower for the combined trade.

If you own the stock through today’s close, you earn the $0.71 dividend. If you have also sold these calls for the suggested $47.75 net debit, and if UHT closes above $50 on October 21, you will be assigned and compelled to sell at $50. This will result in a profit of $2.96 per share on $47.75 per share at risk, or 6.2%. Over a 36-day holding period, the annualized return would be 62.8%.

If UHT closes at or below $50 at expiration, you would still own it at a $47.04 per share cost basis.

Options income for this trade: We earn $100 selling 1 UHT October 21 $50 call contract. Click here for updated bid-ask and return characteristics.

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John Dobosz is editor of Forbes Dividend Investor, which provides a weekly portfolio of high-yielding, value-priced income stocks, REITs and MLPs, and Forbes Premium Income Report, which sends out options-selling trade recommendations on two dividend-paying stocks every Tuesday and Thursday.

NOTE: Forbes Premium Income Report is intended to provide information to interested parties. As we have no knowledge of individual circumstances, goals and/or portfolio concentration or diversification, readers are expected to complete their own due diligence before purchasing any assets or securities mentioned or recommended. We do not guarantee that investments mentioned in this newsletter will produce profits or that they will equal past performance. Although all content is derived from data believed to be reliable, accuracy cannot be guaranteed. John Dobosz and members of the staff of Forbes Premium Income Report may hold positions in some or all the assets/securities listed. Copyright 2022
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by Forbes Media LLC
LLC
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