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Omega Healthcare (OHI) Raises Dividend: Should You Buy?

Zacks

Ushering in good news for its shareholders, Omega Healthcare Investors, Inc. OHI recently announced a 1.6% hike in its quarterly cash dividend. The company will now pay a dividend of 65 cents per share, up from 64 cents paid earlier. The raised dividend will be paid on Nov 15 to shareholders of record as on Oct 31, 2017.

Based on the increased rate, the annual dividend comes to $2.60 a share, resulting in an annualized yield of about 8.3%, considering Omega’s closing price of $31.41 on Oct 12. Given that the company’s dividend yield surpasses the industry average of 4.1%, the stock is likely to draw investors’ attention.

In fact, solid dividend payouts are arguably the biggest enticement for REIT investors and this represents Omega’s 21st consecutive hike in its quarterly common stock dividend. It reflects the company’s consistent efforts to improve shareholders’ wealth.

Omega has solid fundamentals to back dividend hikes. This real estate investment trust (REIT) focuses on investing in and providing financing to the long-term care industry. As of Jun 30, 2017, Omega’s portfolio of investment included around 1,000 properties, situated in 42 states as well as the U.K., operated by 77 operators.

Omega’s ROE is 8.9%, higher than the industry’s ROE of 5.9%. Further, the company has current cash flow growth of 38.0% against the industry average of 15.9%. This will likely help the company sustain its dividend payout to equity investors.

Omega currently has a Zacks Rank #2 (Buy).

The company’s shares have inched up 0.5%, underperforming the industry’s rally of 4.7%, year to date. However, the stock has seen the Zacks Consensus Estimate for 2017 funds from operations (FFO) per share being revised 0.3% upward in two months’ time.



Other Key Picks

Other similarly-ranked stocks in the REIT industry include DCT Industrial Trust Inc. DCT, Prologis Inc. PLD and CoreSite Realty Corporation COR. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

While DCT Industrial and Prologis have expected long-term growth rates of 4.1% and 4.6%, respectively, the expected long-term growth rate for CoreSite Realty is currently pegged at 16%.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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