Thesis and Background
My last article analyzed the long-term prospects of Omega Healthcare Investors (NYSE:OHI). A cost of capital analysis was used to show that the business sustainably earns a healthy return on capital
Omega Healthcare Investors: Wide Yield Spread Suggests Very Low Risks
Summary
- My last article analyzed the long-term prospects of Omega Healthcare Investors (OHI), and the thesis was that it was a quality business for sale at a discounted price.
- A cost of capital analysis showed the business sustainably earns a healthy return on capital invested, demonstrating its long-term profitability and stable moat.
- This article switches the focus to the near term and analyzes its near-term risks from two independent aspects: discounted dividend and yield spread.
- The results further strengthen the bullish thesis by showing a large margin of safety both in terms of discounted valuation and wide yield spread.
Sensor Unlimited is an economist by training with a PhD, with a focus on financial economics. She is a quantitative modeler and for the past decade she has been covering the mortgage market, commercial market, and the banking industry. She writes about asset allocation and ETFs, particularly those related to the overall market, bonds, banking and financial sectors, and housing markets.
Sensor Unlimited contributes to the investing group Envision Early Retirement which is led by Sensor Unlimited. They offer proven solutions to generate both high income and high growth with isolated risks through dynamic asset allocation. Features include: two model portfolios - one for short-term survival/withdrawal and one for aggressive long-term growth, direct access via chat to discuss ideas, monthly updates on all holdings, tax discussions, and ticker critiques by request. Learn More.
Analyst’s Disclosure:I/we have a beneficial long position in the shares of OHI either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.