Medical Facilities Corporation

TSX: DR.UN

Market Cap (MM): 363

Yield: 8.6%

Medical Facilities is a provider of surgical services at four specialty hospitals located in the states of South Dakota and Oklahoma andtwo ASCs (Ambulatory Surgery Centers) recently purchased in California.

It is my favorite holding for a high yield and a growth oriented  investment!

 The specialty hospitals perform scheduled procedures which include surgeries, medical imaging and diagnostics. These hospitals focus on a number of clinical specialties, including orthopedic, neurosurgery, ear nose and throat (ENT) and other surgical procedures. The ASCs complete less complex procedures that do not require overnight stays. Medical Facilities generates almost all of its income from the majority interests in the six facilities and distributes the bulk of its free cash flow to unit holders. The company went public in March 2004 and has consistently increased revenue and EBITDA since 1999. A distribution of $1.10 has been paid annually since it went public.

Outlook: Steady Improvements Expected for Remainder of Year. MFC reported solid Q1 results with YoY increases in surgical & pain cases largely offsetting a negative shift in payors. The company continues to perform well despite headwinds (US economic weakness & HC reforms) as cost containment measures have been effective in improving margins. Shareholders also passed the conversion proposal at the AGM today which provides the company with greater financial flexibility in the future to assist with acquisition opportunities.

Although demand for the units has increased since high-yielding trusts became taxed at the beginning of 2011, MFC's distribution is still attractive at a ~9% yield especially as the US market stabilizes.