Welcome to May! So much for this year being different than 2010 and 2011. The market has had a lousy month so far as headwinds from Europe and signs of slowing domestic growth have rocked the market after months of a nice rally, eerily similar to the two previous years. Energy, Tech, and Materials have had a hard time over the last few weeks. What seems to be holding value are high yielding/low beta vehicles such as energy MLP's, BDC's and REITs. One REIT that recently reported solid earnings is Omega Healthcare Investors (OHI). It provides an almost 8% yield and should benefit from long term demographic changes as the country ages.
Key earnings highlights for OHI:
- FFO increased to 46 cents per share compared with 39 cents a share in same quarter of 2011.
- It raised its distribution payout to 42 cents per share versus 41 cents per share.
- The Company revised its 2012 Adjusted FFO available to common stockholders to be between $2.09 and $2.12 per diluted share versus its previous range of $2.06 to $2.12 per share.
- It retired a $175mm 7% debt offering due in 2016 with a $400mm 5.875% offering due in 2024.
4 reasons OHI provides solid value for income investors at just over $21 a share:
- It yields 7.9% and has doubled its dividend payout over the last seven years.
- Insiders are holding tight and have not sold any shares over the last year. It also has very reasonable forward PE of 10 times FY2013's earnings given its almost 8% yield.
- Based on FFO guidance for FY2012 ($2.09 to $2.12), investors should look for the company to increase dividends payouts by 7% to 10% over the next year.
- Earnings estimates for FY2012 and FY2013 have ticked up nicely over the last three months. The company's new debt structure will allow it acquire other facilities as opportunities present themselves. It also is positioned nicely to take advantage of longer life spans and the aging of the population.