Recently I posted about More Dividends Portfolio Allocation which made me realize that my holdings were weighted a little heavy in the financial and oil sectors. So I set out to find some good opportunities outside of these two sectors. Most people are not aware of the fact that I owned a couple of REITs back last year but then I acted very rash and decided to sell them…. when I should have just held on to them. With this in mind I decided to look for a good company that operated as a real estate investment trust and that led me to Omega Healhcare Investors Inc.
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 and the United Kingdom. It operates through the segment, which consists of investments in healthcare-related real estate properties. It provides lease or mortgage financing to qualified operators of skilled nursing facilities (SNFs) and assisted living facilities (ALFs), independent living facilities, rehabilitation and acute care facilities. Its portfolio consists of long-term leases and mortgage agreements. Its portfolio of investments included approximately 969 healthcare facilities, located in over 41 states and the United Kingdom that are operated by over 83 third-party operators. The portfolio consists of approximately 780 skilled nursing facilities, 85 assisted living facilities, 15 specialty facilities, one medical office building, and fixed rate mortgages on 55 skilled nursing facilities and two assisted living facilities.
OHI seems to be an attractive REIT that is selling cheap right now. The company is currently paying an annual dividend of $2.32 and is selling at around a 7% dividend yield. The company’s current payout ratio based on FFO would be around 70%. The company is earning enough to sufficiently cover its dividend. They have been increasing their dividend for the past 6 years. Currently the stock is around 8% to 9% off of its 52 week high of 37.24.
Something that is of concern with the company is with the pending election, no one knows if medicare will be cut. With it being an election year I highly doubt anyone would want to talk about a proposal to cut Medicare. I don’t really see this as a problem since I plan on holding the stock for the long term. The fact is that the baby boomer generation is getting to the age that they will be needing skilled nursing and assisted living facilities. The average life expectancy is only getting older which tells me that the demand for these types of facilities is only going to go up as time goes on.
With all of this in mind I decided to start a position in Omega Healthcare Investors Inc. I acquired 16 shares at an average price of $32.81 per share. These new shares added $18.56 to my projected dividend income for 2016. That brings my total projected dividend income for this year to $158.35 which is getting closer to my goal of $200 in dividend income for the year.
I will continue to keep an eye on this position and to strengthen this position on any dips that I see in the market. Please leave me a comment and let me know what you think of my recent buy.