Leisureworld: High Yield in Senior Care

01/30/2014 10:00 am EST


Our latest featured recommendation is one of Canada's leading owner/operators of senior housing, particularly long-term care (LTC), explains Art Charney, editor of Big Yield Hunting.

Leisureworld (TSX:LW) (OP:LWSCF) should enjoy a significant tailwind as more and more of Canada's baby boomers retire.

Equally important, a substantial portion of the company's LTC revenue is derived from government funding, which means its core business is supported by a stable, recession-resistant income stream.

And, as the company's long-term growth story unfolds, investors are amply compensated by its CAD0.075 per month payout, which translates into an 8% yield at current share prices.

The small company primarily operates in Ontario and it's the second-largest LTC provider in the province.

The LTC business not only has significant barriers to entry, thanks to the Canadian government's stringent licensing requirements, but it also has exceptionally high occupancy rates, averaging 99% in the most recent quarter.

After hitting an all-time high earlier this year, the company's shares began a protracted sell-off in mid-August, because its second quarter results failed to meet analyst expectations.

But the selling was overdone, and shares have started rising again, while analyst sentiment has improved markedly, following more recent results. We believe the shares currently offer an attractive entry point. Buy Leisureworld below USD11.85.

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