Omega Healthcare Investors, Inc. - Growth & Income
January 25 2012 - 7:00PM
Zacks
Omega Healthcare Investors, Inc. (OHI) offers investors
solid growth and exceptionally strong income at a reasonable price.
Estimates have been rising after the company
delivered better than expected third quarter results. It is a Zacks
#2 Rank (Buy).
The company also pays a divdend that yields a
stellar 7.9%. Valuation is attractive too, with shares trading at
less than 11x forward earnings.
REIT
Omega Healthcare is a real estate investment trust
(REIT) that provides financing and capital to the long-term
healthcare industry across the United States.
The company owns or holds mortgages on 399 skilled
nursing facilities, assisted living facilities and other specialty
hospitals in 35 states, which are operated by 49 third-party
healthcare companies.
It is headquartered in Hunt Valley, Maryland and
has a market cap of $2.1 billion.
7.9% Dividend
As a REIT, Omega Healthcare pays out the majority
of its earnings to shareholders through dividends to avoid paying
tax on that money. It currently yields a whopping 7.9%.
As you can see, the company has been steadily
increasing its dividend over the last several years:
On January 13, the company announced an increase in
its quarterly dividend to 41 cents per share. This marked the 6th
dividend increase since early 2010.
Third Quarter Results
Omega Healthcare also reported better than expected
results for the third quarter. Funds from operation (FFO) per share
came in at 48 cents, beating the Zacks Consensus Estimate of 46
cents. It was a 9% increase over the same quarter in 2010.
Total revenue rose 4% to $72.8 million, ahead of
the Zacks Consensus Estimate of $71.0 million. This was mostly
driven by a 4% increase in rental income.
Total operating expenses declined from 53.1% of
revenue to 40.4% due to lower general & administrative and
depreciation expenses.
Outlook
Analysts raised their estimates for 2012 following
better than expected Q3 results. This sent the stock to a Zacks #2
Rank (Buy).
The Zacks Consensus Estimate for 2011 is $1.79,
representing 8% growth over 2010. The 2012 consensus estimate is
currently $1.95, corresponding with 9% FFO growth.
Reasonable Valuation
The valuation picture looks very reasonable for
OHI. Shares trade at just 10.6x 12-month forward FFO, below the
industry median of 13.6x and its historical median of 11.2x.
Its price to book ratio of 2.4 is in-line with its
5-year median.
The Bottom Line
With rising estimates, solid growth projections, a
7.9% dividend yield and reasonable valuation, Omega Healthcare
offers investors attractive total return potential.
Todd Bunton is the Growth & Income Stock
Strategist for Zacks Investment Research and Co-Editor of the
Reitmeister Value Investor.
OMEGA HLTHCARE (OHI): Free Stock Analysis Report
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