Question

Omega Healthcare Investors Inc. (ticker symbol on NYSE: OHI) is described as an "equity REIT (real estate investment trust) that supports the goals of skilled nursing facility (SNF) and assisted living facility (ALF) operators with financing and capital." OHI has a relatively high dividend. If OHI is managing its retained earnings to maximize economic profits, a reasonable explanation is that:_____

Answer 1

The reasonable explanation is that they are trying to take advantage of government tax incentives which are usually available to companies which retain their earning for investment purposes.

Explanation:

Many governments usually subject distributed profit to corporate tax. When this happens, a huge chunk of profit is eroded. So many companies would rather re-invest their earnings to increase the value of their stock in the secondary market.

The average corporate tax rate in the EU, for instance, is 21.77% whilst the average corporate tax rate in the OECD for is 23.59%.

OECD, by the way, stands for Organisation for Economic Co-operation and Development and the United States of America is a member.

Cheers!