Freedom advised a stock in a promising market for investments in healthcare facilities

Freedom Broker has initiated on Universal Health Realty

Income Trust (UHT), a small-cap REIT, with a «buy» at a target price

18% above current quotes. The company offers stable income given its focus on

the steady healthcare segment, Freedom Broker explained. 

Freedom Broker has advised buying UHT shares and assigned a

target price of $47 per share. This implies 18.3% upside versus the closing

price of $39.71 per share on Friday, May 30.

Before the opening bell today, June 2, UHT has added 0.7% to

reach the $40 per share mark. During regular sessions, the stock has not seen

that level in almost two months. Year to date, it is now up about 7%.

According to MarketWatch

and MarketScreener,

UHT has just one rating and one target price, which are in line with Freedom

Broker's.

UHT is a REIT specializing

in healthcare and human service related facilities. The segment is known for

its stability and low sensitivity to changes in the economy. The company has

leases expiring in 2026 and 2040, which ensures steady and predictable

revenue. 

Demographic trends also work in the company's favor: The

U.S. population is aging, leading to higher demand for healthcare services. In

addition, UHT has a reliable partner: health care provider Universal Health

Services. It manages UHT through a subsidiary, provides consulting, and leases

facilities from it.

Finally, UHT has been paying out dividends since 1986. The

2024 dividend came to $2.92

per share. This is part of a steady increase in returns for investors, who can

expect a dividend yield of about 6-8%.

At the same time, investors should be mindful of the risks,

Freedom Broker cautions. 

High interest rates could be detrimental to UHT's business,

as half its debt is floating rate. As of the end of the first quarter, the

company had credit

lines totaling $349.5 million, it said in its first-quarter reporting. It

flagged rising credit costs as one of the reasons why its net income fell

nearly 9.5% year over year to $4.8 million. 

Meanwhile, any headwinds at Universal Health Services may

delay or reduce payments to UHT. Finally, although Universal Health Services

manages UHT through a subsidiary, it in effect appoints UHT's officers and has

significant control over decision-making, which brings into play possible

conflicts of interest.