As I mentioned in my previous post, “Stock Purchase: Union Pacific Corp (UNP),” I recently raised another $16k in cash from mutual fund sales in my 401k. This is part of an ongoing conversion of about 65% of my 401k to dividend growth stocks – which I am calling my Dividend Retirement portfolio. I was hoping to slow my purchasing down a bit after UNP but I just couldn’t resist buying Omega Healthcare Investors (OHI) at current levels. Here are the details of my purchase:
5/7/2015 – Omega Healthcare Investors (OHI)
- Portfolio: Dividend Retirement
- Shares purchased: 84
- Cost per share: $35.5299
- Commissions: $14.95
- Cost basis: $2999.46
- Yield: 6.05%
- Expected annual income: $181.44
This holding is now my highest yielding stock providing me the most forward income. I was quite pleased to pick it up at a yield on cost over 6%! This purchase makes my portfolio a bit REIT heavy but I think this is normal for someone just establishing their portfolio. Besides, REITs are a steal right now!
OHI Company Overview
From the OHI website:
Omega Healthcare Investors, Inc. (NYSE:OHI) is a Real Estate Investment Trust (“REIT”) providing financing and capital to the long-term healthcare industry with a particular focus on skilled nursing facilities located in the United States.
As of April 1, 2015, after giving effect to the Aviv merger transaction, Omega has a portfolio of investments that includes over 900 properties located in 41 states and operated by 81 different operators.
As a source of capital to the healthcare industry, Omega continually evaluates the opportunities, trends and challenges affecting the industry. Our goal is to identify long-term investments in quality healthcare properties with outstanding operators that provide the most favorable risk/reward ratio to our investors.
When I purchase a dividend growth stock, I typically like to give a detailed summary of a company’s financial strength. Much to my benefit, most of this research and analysis has been covered very well by Ryan over at My Dividend Growth in his post, “Recent Purchase and Analysis of Omega Healthcare Investors (OHI).” There are also several well written articles over at Seeking Alpha. Therefore I will pass on the financial analysis this time and only talk briefly about the OHI dividends.
OHI Dividend Performance
The OHI dividend is one of the most attractive features of this dividend growth stock. OHI has raised their dividend just about every quarter over the past 5 years with an annual growth rate over 10%. This is exceptional for a stock that is already yielding over 6%. If this dividend growth rate continues my yield on cost would be almost 9% in 5 years!
Their cash flow from operations has been rising steadily over the past 10 years
And although their free cash flow has fluctuated wildly, this is due to large investments (growth) and should actually help them cover future dividends. In fact, their payout ratio has been decreasing every year since 2010.
Adding 84 shares of OHI to my Dividend Retirement portfolio increases my portfolio yield on cost to 3.33% (from 3.08%), a very nice boost. My forward annual income increased from $1019.40 to $1200.84.