Linked here is a detailed quantitative analysis by Omega Healthcare Investors, Inc. (OHI). Below are some highlights from the analysis linked above:
Company description: Omega Healthcare Investors Inc. is a real estate investment trust (REIT) that invests in income generating healthcare facilities, primarily long term care facilities in the United States.
Fair value: When calculating the fair value, I take into account the differential fair value of the present value MMA along with these four fair value calculations. A detailed description can be found on page 2 of the linked PDF:
1. Avg. High yield price
2. 20-year DCF award
3. Avg. P / E price
4. Graham Number
OHI trades at a premium to all four of the above ratings. Including the NPV MMA differential, the stock is trading at a premium of 41.3% over the calculated fair value of $ 25.34. OHI does not deserve any stars in this area.
Dividend analytical data: There are three possible stars and three key metrics in this section. A detailed description can be found on page 2 of the linked PDF:
1. Free cash flow payout
2. Debt to total capital
3. Key Metrics
4. Dividend Growth Rate
5th years Div. growth
6. Rolling 4 year old Div. > 15%
OHI does not deserve any stars in this area. The company has paid a cash dividend to shareholders every year since 2003 and increased dividend payments for 0 consecutive years.
Dividend Income vs. MMA: Why would you take the equity risk and invest in a dividend stock when you could get a better return on a much less risky money market account (MMA) or a government bond? This section compares that stock’s earning power to a High performance MMA. There are two points covered in this section. A detailed description can be found on page 2 of the linked PDF:
1. NPV MMA Diff.
2. years to> MMA
The NPV MMA Diff. of the $ 1,780 is below the $ 3,500 target I’m looking for for a stock that has been increasing dividends as long as OHI has done so. The stock’s current yield of 7.48% exceeds the estimated average MMA rate of 2.74% for 20 years.
Peers: The company’s peer group includes: Healthcare Realty Trust Incorporated (HR) with a yield of 4.0% and Ventas, Inc. (VTR) with 3.3%.
Conclusion: OHI did not deserve any stars in the Fair Value area, did not deserve any stars in the Dividend Analytical Data area and did not earn any stars for a total of zero stars in the Dividend Income vs. MMA area. This classifies OHI quantitatively as Avoid 0 stars Warehouse.
With my D4L-PreScreen.xls Model, I decided that the stock price would have to drop to $ 26.75 before OHI’s NPI MMA differential rose to the minimum of $ 3,500 that I’m looking for on a stock with 0 years of consecutive dividend increases. At that price, the stock would generate a return of 10.0%.
Resetting the D4L-PreScreen.xls Model and solution for the dividend growth rate required to achieve the targeted MMA differential of $ 3,500, the calculated rate is 3.1%. This dividend growth rate is higher than the 0.0% used in this analysis, so there is no margin of safety. OHI has one Risk assessment out of 2.5, which it classifies as a high risk stock.
The stock is currently trading above my calculated fair value of $ 25.34. As a REIT, OHI is legally obliged to pay out 90% of its income. The free cash flow payout is 86% (versus 109%). I will wait for free cash flow to improve and dividend increases to resume before building my position.
Disclaimer: The material presented here is for informational purposes only. The above quantitative stock analysis, including the star rating, is mechanically calculated and based on historical information. The analysis assumes that the share will develop in the future as it has in the past. In general, this is never true. Before buying or selling stocks you should do your own research and arrive at your own conclusion. Please see my disclaimer for more information.
Full disclosure: At the time of this writing, I was long in the OHI (0.6% of my dividend growth portfolio). Show a list of all my dividend growth portfolio holdings Here.
On the subject of matching items:
– Amgen, Inc. (AMGN) dividend stock analysis
– Analysis of AT&T Inc. (T) dividend stocks
– Analysis of Cardinal Health, Inc. (CAH) dividend stocks
– AFLAC Incorporated (AFL) dividend stock analysis
– Analysis of 3M Co. (MMM) dividend stocks
– More stock analysis
Tags: OHI, HCP, HR, VTR,