High Dividend Stocks: Omega Healthcare Investors, Inc. (NYSE:OHI)
By: Ned Piplovic,
Omega Healthcare Investors, Inc. (NYSE:OHI) is one of the largest health care equity real estate investment trusts (REITs) in the United States and also one of the high dividend stocks that have rewarded its shareholders with more than a decade of steadily rising dividend income distributions.
For this analysis, the high-dividend-yield stocks label means more than just a high current dividend yield. To be considered among the high dividend stocks in this context, the equity must meet additional criteria beside the high-dividend-yield rate. Because the yield can rise easily as a result of sudden share price drops, the high-dividend-yield rate is not a good determinant of high-dividend stocks on its own.
Therefore, to be one of the high-dividend stocks for this analysis, securities must also offer additional positive metrics. In addition to a current dividend yield that exceeds 5%, equities also must deliver a positive total return over the past 12-months and three years, as well as have a current streak of at least three consecutive annual dividend hikes.
Despite a pullback between 2015 and early 2018, the share price still has delivered strong long-term gains. Since losing approximately 40% of its value during the 2008 financial crisis, the share price gained more than 250% and is currently riding an uptrend to extend those gains. Since its all-time low in 2001, the share price has grown more than 25-fold.
The fund distributed its first distribution in 1992. However, after nearly a decade of consecutive dividend distributions, the company suspended payouts after the third-quarter distribution in 2000. However, the company resumed payouts in November 2003 and has not missed a quarterly distribution since then. On May 15, the REIT paid its most recent distribution. Based on the trust’s distribution schedule over the past few years, investors should expect a declaration of the next payout amount in mid-July. The estimated ex-dividend date should be in late July with the pay date following closely in mid-August.
Omega Healthcare Investors, Inc. (NYSE:OHI)
Omega Healthcare Investors is a real estate investment trust (REIT) that finances sale, leaseback, construction and renovation of long-term health care facilities in the United States and the United Kingdom. When Omega Healthcare became listed on the NYSE in 1992, the company was one of the first publicly traded REITs that was explicitly structured to finance the sale, leaseback, construction and renovation of nursing and assisted living facilities. Omega Healthcare merged with Aviv REIT in 2015, which created the largest publicly traded REIT in the United States dedicated specifically to skilled nursing facilities (SNFs). As of September 30, 2018, the company had more than 900 facilities in its portfolio. In addition to 55 locations in the United Kingdom, the U.S. facilities were spread across 41 U.S. states. While OHI owns and leases the buildings, 69 third party operators manage the day-to-day operations at these facilities.
High Dividend Stocks: Omega Healthcare Share Price
The company’s share price reversed its recent downtrend and has been rising relatively steadily since mid-April 2018. After an initial pullback amid normal fluctuations, the share price fell 5.3% at the onset of the trailing 12-month period. However, after reaching its 52-week low of $29.32 on July 30, 2018, the share price reversed its downtrend. Since changing course at the end of July 2018, the share price gained more than 37% before reaching its 52-week high price of $40.19 on January 31, 2019.
After the January 2019 peak, the share price pulled back slightly, leveled off and has been trading somewhat sideways. However, the January high appear to have been just a spike and the share price still follows its overall uptrend over the past 12 months. At the end of trading on June 18, 2019, the share price closed at $37.12. While even with the share price level from five years ago, the June 18, closing price was 20% higher than one year earlier and nearly 27% above the 52-week low from late July 2018.
High Dividend Stocks: Omega Healthcare Dividends
Omega Healthcare’s most recent distribution of $0.66 is equivalent to an annualized amount of $2.64. At the current share price of $37.12, the trust offers a 7.1% forward dividend yield. The current yield is in line with the trusts own yield average over the past five years and nearly 140% higher than the 2.97% simple average yield of the entire Financial sector. Furthermore, the REIT’s current yield is almost 85% above the 3.86% average yield of the equities in the Healthcare Facilities industry segment, as well as 28% higher than the 5.55% average yield of the segment’s only dividend-paying companies.
The trust has enhanced its total annual dividend amount 340% since resuming distribution in late 2003. This pace of advancement corresponds to an average growth rate of nearly 10% per year.
The strong share price rebound over the past year rewarded Omega Healthcare’s shareholders with a total return on investment of more than 27%. Share price growth contributed approximately one quarter of the 36% total return over the past three years.
However, since the share price did not deliver any gains over the past five years, the total five-year return of nearly 40% originated from the fund’s dividend distributions. Even with no capital gains, the fund’s 40% total return from only dividend distributions over the past five years just reiterates Omega Healthcare’s status as one of the high-dividend stocks.
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