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Omega Healthcare Investors Inc. (OHI) Stock Analysis Pollie Style 2016

Last year I did my research on OHI. A lot has changed since last year. It is time to do my research again.

Why did and do I research on OHI you ask? Just like in Europe, America has a lot of Baby Boomers. And they will soon be retiring. They will need medical care and good assisted living facilities for the next 30 years. Does that answer your question?

This analysis is on Omega Healthcare Investors Inc. (OHI).

Company (from google finance): Omega Healthcare Investors inc. is a self-administered real estate investment trust (REIT). The Company invests in income producing healthcare facilities; long-term care facilities located throughout the United States. The Company provides lease or mortgage financing to qualified operators of skilled nursing facilities (SNFs) and assisted living facilities (ALFs), independent living facilities and rehabilitation and acute care facilities. The Company maintains a portfolio of long-term healthcare facilities and mortgages on healthcare facilities located throughout the United States. The Company’s investments are operated by a diverse group of established, middle-market healthcare operators.


Can I explain this to a 10-year old? What Does This Company Do?  This company owns care homes and specialty hospitals. In 37 states of the US their facilities can be found. Besides owning these facilities, hey also provide the mortgage for facilities.

Dividend Aristocrat: OHI is paying Dividend for 14 years in a row. It is therefore a Dividend Contender on the CCC-list from David Fish! (Nr. 233) They do not have any stars on Morningstar.com. It is a Dividend Contender but not yet a dividend Aristocrat, so that’s a fail!

Dividend Yield > 2.5%: The dividend Yield of OHI is 7.25%. This is above the industry average of 5.7%. But it is above the 5 years average (6.5%). The last 11 quarters they raised the dividend every time (a small amount). The Yield is above the requirements of the Pollie-Code, and therefore it passed the second Pollie-code.

Dividend payout <70%: As you, my dear readers know a REIT is required by law to distribute a certain percentage of earnings (this figure now sits at around 90% for REITs). For this reason, you have to look at de FFO pay out ratio. The FFO payout is roughly 70%. Therefore this is a pass.

DGR 1 year > 0%: The dividend growth rate for 1, 3, 5 and 10 years are 7.9, 8.9, 9.7 and 9.9. With a 3-years average around 9%. This is a little low, because I like DGR’s of more than 10%. But is above the requirements of the Pollie-code, so it is a pass.

P/E-ratio < 15: OHI has a current P/FFO ratio is 10.59. This metric is below the requirement of the Pollie-Code. Therefore this is a pass.

EPS > 0: The EPS is 1.21. So OHI passed the sixth Pollie-Code

ROE > 10%: Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested. The current ROE is 7.3%. This is another fail.

Market Cap. > 100M: No problem at this point. The Market cap. Is more than $ 5.983 Mil. You guested it already: Another pass.

Chowder Rule > 12: Named after “Seeking Alpha” member Chowder. This is a method of identifying candidates for purchase based on a combination of yield and (5-year) dividend growth rate. When the sum of these elements is above 12%, the company presents an attractive entry point (8% for utilities). When the figure is above 8%, an existing holding is still considered worthy of being retained. The current Chowder rule is 17.0. This is therefore a pass on the Pollie-code.

Stock price 52wk high-25%: The 52 wk. high and low are: 37.24 and 26.96. This means that OHI will be in my buying zone when the stock price is below 34.67 ((37.24-26.96)*0,75 + 26.96). At this moment OHI is trading for $32.61. Therefore it is a pass on the Pollie-Code.

Beta: I think it’s important to have low Beta stocks in my portfolio. This helps to have a stable income all the time, even when the market has a rapid decline. The Beta for OHI is 0.82.

Conclusion: When I look at my analysis, OHI passed 8 out of 10 from the Pollie-code! The Pollie-code failed at the ROE and it is not an Aristocrat.

On seeking Alpha I found a recent article on OHI, by Dividend Sensei. In this article OHI is compared to 3 competitors. OHI crushed these companies. OHI crushed them on Return On Invested Capital (ROIC), best dividend profile and debt/Ebitda. I especially like a high ROIC. Because a high ROIC means that management is making the most of our money. And that’s what a DGI likes!

At the end of the article Dividend Sensei wrote: “Bottom line: Omega Healthcare is a solid “Sleep Well at Night” choice to profit from this demographic mega-trend
I could not have said it better!!

All this information together I’m thinking to buy some more shares for my Vrijheid Fonds.

What are you – the readers, thoughts on Omega Healthcare Investors Inc.? Is it a buy, do you own it?

Please comment on my analysis and thanks for stopping by!

Pollie.

DISCLAIMER: I’M NOT A REGISTERED INVESTMENT ADVISER, INVESTMENT PROFESSIONAL, BROKERAGE FIRM OR INVESTMENT COMPANY. READERS ARE ADVISED THAT INFORMATION ON THE WEBSITE IS ISSUED SOLELY FOR INFORMATION PURPOSES AND NOT TO BE CONSTRUED AS AN OFFER OR RECOMMENDATION TO BUY, HOLD, OR SELL ANY SECURITIES. ALL INFORMATION, OPINIONS, AND ANALYSES INCLUDED ARE BASED ON SOURCES BELIEVED TO BE RELIABLE, BUT NO REPRESENTATION OR WARRANTY IS MADE CONCERNING ACCURACY, CORRECTNESS, TIMELINESS, OR APPROPRIATENESS. PLEASE CONSULT WITH AN INVESTMENT PROFESSIONAL BEFORE INVESTING ANY OF YOUR MONEY.

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4 thoughts on “Omega Healthcare Investors Inc. (OHI) Stock Analysis Pollie Style 2016

  1. Dividend Diplomats

    OHI is one of those REITs that is on my radar. My allocation in healthcare REITs used to be too high, which is why I stayed away from this gem. However, now that I have added to my portfolio OHI and others are back on the block. Your analysis makes a pretty compelling case for OHI. Plus, every time there is a pullback, the dividend community seems to scoop this company up. Great analysis and thanks for taking the time to put it together!

    Bert

  2. More Dividends

    Moving forward I really like OHI. I had been watching them for awhile and recently started a position. When the price dips I will gladly add some more. Thanks for sharing!

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