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

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Ushering in good news for its shareholders, Omega Healthcare Investors, Inc. OHI recently declared a 1.6% hike in its quarterly cash dividend. The company will now pay a dividend of 62 cents per share, up from 61 cents paid earlier. The raised dividend will be paid on Feb 15 to shareholders of record as on Jan 31, 2017.

Based on the increased rate, the annual dividend comes to $2.48 a share, resulting in an annualized yield of about 7.64%, considering Omega’s closing price of $32.46 on Jan 13. Given that the company’s dividend yield surpasses the industry average of 4.39%, the stock is likely to draw investors’ attention ahead.

In fact, solid dividend payouts are arguably the biggest enticement for REIT investors and this represents Omega’s 18th 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 Sep 30, 2016, Omega’s portfolio of investment included around 1,000 properties, situated in 42 states as well as the UK, operated by 81 operators.

In fact, the company has been a steady performer, beating the Zacks Consensus Estimate in each of the past four trailing quarters, with an average positive surprise of 4.39%. Omega’s ROE is 14.28%, higher than the industry’s ROE of 13.01%.

Further, the company has current cash flow growth of 31.66% against the industry average of 14.82%. This should help the company to sustain its dividend payout to equity investors. It’s also very liquid, with a current ratio of 2.47. However, the recent rate hike and healthcare reform policies remain concerns.  

Omega presently has a Zacks Rank #3 (Hold). Over the past one month, shares of Omega ascended 3.4%, against 1.23% decline of the REIT and Equity Trust – Other industry.



Some better-ranked stocks in the REIT industry include The GEO Group, Inc. GEO, Mack-Cali Realty Corp. (CLI - Free Report) and Urban Edge Properties UE. While The GEO Group sports a Zacks Rank #1 (Strong Buy), Mack-Cali and Urban Edge carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The GEO Group’ 2016 estimates inched up 1% to $2.94 per share, over the past 60 days.

Mack-Cali’s 2016 FFO per share estimates ascended 1.9%, over the past 60 days, to $2.20.

For Urban Edge Properties, the projected growth rate for FFO per share is 37.6% for 2016 and 6.3% for 2017.

Note: Funds from operations (“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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