Why Omega Healthcare Investors is a Solid Dividend Stock

Omega Healthcare Investors

Many investors choose to build an investment portfolio of dividend stocks that will continue to reap high yields in the long-term. When deciding which are the best companies in which to invest, it is important to consider many factors regarding the company’s history. This includes the company’s growth, how long they have paid out dividends, and whether the yields have been good in the past. It is also important that an investor looks at the future potential of the company to decide if it will remain a good investment in the long-term. Much of this is based on predictions regarding potential growth or diversification, and the type of industry. One company that many financial experts consider a sound investment that is a safe bet for the long-term is Omega Healthcare Investors, Inc. (NYSE:OHI), and here is an overview of the reasons why.

What You Need to Know

Omega Healthcare Investors, Inc. is a triple-net, equity real estate investment trust (REIT). The company was founded in 1992, and it works in partnership with 65 companies from both the United States and the United Kingdom. It is now one of the leading REITs in the United States. The predominant focus of this company is owning nursing homes, and they now own more than 900 properties in the United Kingdom and across 40 states in the United States. One factor that makes Omega Healthcare a sound option for the long-term is the industry. There is not only a continuing need for healthcare services, but there is a growing demand for supported living and nursing homes for the elderly. The population is continuing to grow, and people are living longer, thanks to advancements in medicine. This means that a larger percentage of the population need support and nursing in their later years. Therefore, healthcare REITs are in a sector that is growing, and this means that Omega Healthcare is likely to remain profitable and stable over the next few decades.

The Motley Fool highlights how the split of the company is also significant. Only about 18 percent of Omega Healthcare properties provide senior housing and healthcare for those with minimal medical needs. The remaining 82 percent of the company consists of properties that provide services and nursing for those with continuous medical needs. People who have greater medical needs pay higher fees to live in properties that provide the medical support they need, so Omega Healthcare will have a continuous source of income. Similarly, Omega Healthcare is making a push towards the private healthcare market rather than relying solely on government-funded facilities or those that are paid for via insurance or payment systems. This means that their income is not reliant on changes inflicted by the government as they are paid directly by those using the services at many of the properties.

Other Information

Omega is currently the biggest place in the healthcare REIT sector, and it owns more than twice the number of properties as its closest competitor. However, this company still only has a market share of around five percent. This means that there is still plenty of opportunity for acquisition-led growth in the coming years. This potential for growth is an important point for potential investors to take onboard. Another point to make is that Omega Healthcare properties have a reasonable occupancy rate that is growing. Back in 2015, the occupancy rate was around 81.9 percent. By the end of May 2019, Omega Healthcare’s properties had an occupancy rate of around 82.8 percent. These figures are reasonable, but there is still room for improvement as many other REITs have occupancy rates that are closer to 90 percent.

For most investors, one of the main concerns is the yield and dividend payout history of a company, and this information can make all the difference between whether a potential investor will choose to invest or not. Currently, Omega Healthcare Investors is a high yield company that has a good dividend payout history. According to Seeking Alpha, Omega Healthcare Investors paid out increasing dividends for 22 consecutive quarters. When the yield peaked at eight percent in 2018, they froze the dividends. This was a sensible move as it is important that a company can financially support increasing dividends.

Now, the yield is slightly lower at around 7.4 percent. Despite the drop, this is still a high yield dividend. In the first quarter of 2019, Omega Healthcare Investors’ payout ratio was 86 percent. If this level of payout ratio can hold, then it seems that this company is a sound investment. According to NASDAQ, Omega Healthcare has been named as one of the top dividend stocks with insider buying. The fact that insiders from the company want to invest is a strong indicator that this company is a stable option as those working for the company are expecting to make money from their investment. Therefore, it is a sign that other investors can expect to receive decent payouts in the long-term.

Like most investments, there are also some potential risks that you should consider before deciding to invest in Omega Healthcare Investors. The main risk with this company is that they have not diversified as much as other REITs, so they do not have the same security blanket that diversification provides. However, this risk is minimal and the positive aspects of this company outweigh this one negative consideration. Overall, Omega Healthcare Investors is a dividend stock that is worth considering as it is predicted to remain stable. The trend for increasing dividends and high yields should continue in the foreseeable future. This is because the company has opportunities for growth, they are leaders in the market, and they have a sound history in terms of yields and dividend payouts. Although there are some risks attached to investing in this company and it may not appeal to conservative investors, the benefits of investing in Omega Healthcare Investors seem to outweigh any potential risk.


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