Omega Healthcare Investors Pays 15 Consecutive Years of Rising Dividends (OHI)

Omega Healthcare Investors, Inc. (NYSE:OHI) – one of the largest health care equity real estate investment trusts (REIT) in the United States – has rewarded its shareholders with 15 consecutive years of rising dividends and currently pays a double-digit dividend yield.

The company suspended its dividend distributions for three full years after the third quarter of 2000. However, since resuming dividend distributions in the fourth quarter of 2003, the company has hiked its quarterly dividend in 43 out of 58 consecutive quarters – almost 75% of the time.

The company’s board of directors declared a common stock dividend of $0.66 per share, which will be distributed on the May 15, 2018, pay date to all common stockholders of record prior to the ex-dividend date, which is set for April 27, 2018.

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 December 31, 2017, the company had 973 facilities in its portfolio. In addition to 53 locations in the United Kingdom, 920 facilities were spread across 41 U.S. states. While OHI owns and leases the buildings, 74 third party operators manage the day-to-day operations at these facilities. Currently, about 85% of the facilities are SNFs and the remaining 15% are senior housing facilities. The company’s biggest concentration is in Ohio, Florida and Texas, with each of these three states accounting for 9% of OHI’s total number of facilities. Michigan, with 7% of total facilities and California with 6%, round out the five states that have the most OHI senior-care locations.

The company’s share rose 1% at the start of the current 12-month period and reached its 52-week high of $34.98 on April 21, 2017. Unfortunately, the share price has been mostly declining since its April 2017 peak amid moderate volatility. Over the past 12 months, the share price declined almost 25%. However, nearly half of that drop occurred during the last week of October 2017 and primarily was driven by a $6.3 million loss in funds from operations (FFO), which resulted from late rent payments of OHI’s biggest tenant – 4 West Holdings, Inc. which also is known as Orianna Health Systems. In early March 2018, Orianna Health Systems commenced voluntary Chapter 11 bankruptcy proceedings in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division.

However, OHI’s leadership anticipated the impact and has forecasted its 2018 figures accordingly. C. Taylor Pickett, Omega Healthcare’s chief executive officer, stated that its “previously announced guidance assumed the company will not be recording revenue related to its Orianna portfolio for the majority of 2018. Orianna’s Chapter 11 filing does not change our estimates and, accordingly, we reaffirm the adjusted funds from operations (Adjusted FFO) guidance contained in our February 13, 2018, earnings release in the range of $2.96 – $3.06. Of course, our actual results will depend on the timing of the transitions and sales contemplated by the RSA [Restructuring Support Agreement].”

The 52-week low of $25.36 occurred on February 8, 2018, during the overall market sell-off. Since this low, the share price has risen 3.7% and closed on April 18, 2018, at $26.31. While the share price decline put a damper on the returns for existing shareholders, if the share price recovers, the current dip could be a good opportunity for new investors to take a long position at a discounted price, while taking advantage of the above-average dividend income.

The share price drop increased the dividend yield into double-digits. The current $0.66 quarterly dividend is nearly 5% higher than the $0.63 payout from the same period last year. This current quarterly amount is equivalent to a $2.64 annualized distribution per share and a 10.2% yield. The current yield is 44.4% higher than OHI’s own 7% average yield for the past five years.

Omega Healthcare boosted its dividend distribution for the last 15 consecutive years at an average growth rate of 10.4% per year. Over that period, OHI managed to raise its total annual dividend 340% over the $0.60 annualized dividend payout from 2003.

The current yield is more than triple the Financials sector average of 3.28% and 91.5% higher than the 5.28% average yield of all the companies in the health care facilities REIT’s market segment. Additionally, OHI’s current yield even exceeds the 6.82% average of the market segment’s only dividend-paying companies by more than 48%.

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