OHI Stock: A High Yield Stock That’s Seen 19 Straight Dividend Hikes
OHI Stock Offering a Dividend Yield of 7.63%
There are two ways to invest in the real estate market: by owning physical real estate, or by being a shareholder in a company that does. Both will give you exposure and offer a capital gain through property appreciation. Investors will also see regular cash flow generated through rental income.
But, while they have their similarities, there are three major differences: diversification, time management, and professional management. Diversification comes from the number of properties that are owned, and their locations. Shareholders have the benefit of full diversification, since there could be hundreds of properties owned, meaning that one or two being vacant won’t interrupt cash flow. Properties in different areas can also mean different types of economic growth. In contrast, a property owner would only care about a few areas/properties.
As for time management, property ownership could require a great deal of effort, since you are responsible for a lot of upkeep on behalf of tenants, not to mention possibly having to chase them down for rent. But as a shareholder, you are not liable for maintaining the property.
Lately, the portfolio is professionally managed by experts with years of experience. These people understand the various types of markets and cycles that would affect the company and should create value since capital would be only deployed in the areas that would generate the highest rate of return.
One company that offers all three of these benefits is Omega Healthcare Investors Inc. (NYSE:OHI). Within the company’s ecosystem are more than 1,000 properties in 42 states and the U.K.
Steady and Growing Cash Flow
OHI stock has been paying a steady and growing dividend for the past seven years, increasing by more than 100% over this period. More specifically, there have been dividend hikes for the past 19 straight quarters. The current high dividend yield is 7.63%, which is three times greater than that of the S&P 500 Index.
OHI stock is structured as a real estate investment trust (REIT), meaning at least 90% of the cash flow must be paid to investors via a dividend in order for the company to receive tax breaks. This ensures that there is a constant income being received by investors. Also, when revenue is increasing, there is a mandatory obligation to increase the dividend.
This growing payout and revenue has helped the stock price see a boost, growing 43% over the past five years. This also factors in the price of the actual properties and the size of the total portfolio increasing.
Great Professional Management
One way to determine how well a company is managed is by taking a look at how much money is left after operating costs are accounted for. These numbers are then compared to the company’s industry peers, since the performance of the economy will have the same impact on the entire sector.
Note the operating and profit margins of both OHI stock and the industry average. Once variable costs are accounted for, Omega has over $0.60 from every dollar remaining (the operating margin). The industry average is in the negative, meaning too many other companies are spending more than they are bringing in, eventually hurting their dividend and share price. The same could be said for the profit margin, which is 47% for Omega Healthcare Investors stock and in the negatives for the overall industry.
The Bottom Line on OHI Stock
OHI stock offers exposure to the real estate market without the need to work yourself to the bone satisfying tenants. There’s also the benefits that come with some states favoring tenants over homeowners.
The real estate sector is known for building both wealth and income over the long term. And as you can hopefully now see, OHI stock will give you the peace of mind of doing exactly that.