Omega Healthcare Investors Inc (OHI): Big Dividend, 3 Big Risks

Valuation

The above data table provides a variety of useful information in gauging Omega’s value. For example, Omega’s Adjusted Funds from Operations (AFFO) and Funds Available for Distribution (FAD) both continue to grow. Additionally, the FAD payout ratio is relatively low by historical standards (indicating a strong and healthy dividend). And management continues to exceed its own AFFO guidance, and it appears it will again this year (2016) as management has again raised guidance above its original estimate.

And worth re-mentioning, Omega has demographic tailwinds at its back (a growing aging population), as well as the potential for regulatory benefits too (i.e. less costly entitlement regulation) following the recent US elections.

Conclusion

Without question, Omega Healthcare Investors Inc (NYSE:OHI) faces uncertainty. However, three of the biggest risks (macroeconomic headwinds, ACA uncertainty, and overly pessimistic investors) have created an attractive opportunity, in our view. The valuation is attractive, the big dividend is safe and growing, and Omega could be a very valuable addition to a well-diversified, long-term, income-focused, investment portfolio.