Is Now A Good Time To Buy Omega Healthcare Investors?

When investors consider acquiring a stock, making an informed decision requires assessing numerous variables, including the fundamentals, historical performance, dividend growth, and recent events.

However, investors also need to determine whether now is the right time to acquire a particular stock. How do analysts perceive the company’s prospects? What was the outcome of the latest quarterly earnings report? What do the technical indicators say about the risk of purchase now?

One Healthcare real estate investment trust (REIT) has performed quite well over the past five months. But is it too late to purchase? Take a look: 

Omega Healthcare Investors

Omega Healthcare Investors Inc. OHI is a Hunt Valley, Md., triple-net equity health care Real Estate Investment Trust (REIT) that provides financing, capital, and triple-net leasing to 73 different operators among 866 senior housing, skilled nursing and assisted living facilities in 42 states in the U.S. and the United Kingdom. 

Omega Healthcare Investors has operators who provide the day-to-day management of these facilities. Omega has nearly $10 billion worth of real estate investments. Texas and Indiana are the two states with the largest number of Omega facilities.

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On May 2, Omega Healthcare Investors reported its first quarter 2024 operating results. AFFO of $0.68 per share beat the analyst consensus estimate of $0.66 and topped AFFO of $0.66 per share from Q1 2023. Revenue of $243.299 million was above the analyst consensus estimate of $231.639 million and was an 11.50% increase over revenue of $218.202 million in Q1 2023.

Omega Healthcare also affirmed its full-year 2024 AFFO guidance of $2.70-$2.80.

One of Omega Healthcare's strengths has been its quarterly dividend payments. Although there have been no increases since October 2019, more importantly, there have been no cuts or suspensions, even during the COVID-19 pandemic. The same cannot be said for Sabra Healthcare, which cut its dividend in 2020 from $0.45 to $0.30 or Healthcare Realty Trust, which cut its $0.31 quarterly dividend to $0.20 and then $0.11 in 2022.

The quarterly dividend is $0.67 per share and the $2.68 annualized dividend yields a generous 8.0%. The payout ratio of 80% is high and not conducive to further dividend hikes soon, but with a yield of 8%, that should be no problem for investors. 

Recent analyst ratings have been positive.

On June 21, Ford Equity Research upgraded Omega Healthcare from four to three.

On June 25, Truist Securities analyst Michael Lewis maintained Omega Healthcare with a Hold and raised the price target from $32 to $33. 

In recent news, on June 3, Omega Healthcare announced it would commit $10 million to Lavie Care Centers, one of Omega's operators, to fund 50% of debtor-in-possession (DIP) financing during bankruptcy. One of the DIP financing stipulations is that Lavie must pay Omega monthly rent of $3 million on the 30 properties that it operates. The agreement is subject to approval by the bankruptcy court. 

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The Healthcare REIT subsector has shown strength recently after two years of negative performance. Over the past four weeks, Omega Healthcare has outperformed peers such as Ventas Inc. VTR, American Healthcare REIT Inc. AHR, Healthcare Realty Trust Inc. HR and Sabra Healthcare REIT Inc. SBRA with a 6.84% total return.

Year-to-date, Omega Healthcare's total return is 12.12%, with most of that return coming since February.

Even with its strong 2024 performance, the price/FFO ratio is still only 12.07, slightly below the health care sector median of 12.43. 

Below is Omega Healthcare's daily chart. The share price has had a strong run-up of 19.4% since touching a low of $27 in February and recently broke through resistance at $32.57. In April, the shorter-term 50-period simple moving average (SMA) crossed above the longer-term 200-period SMA, forming a "golden cross" pattern. Although a lagging indicator, the golden cross usually confirms that a new bull market has formed.

However, the full stochastic and RSI indicators are very close to overbought levels, so Omega Healthcare’s recent momentum could slow down going forward.

                                                              stockcharts.com

In summation, Omega Healthcare Investors has many positives, such as:

·   An excellent first quarter earnings report and affirmation of previous guidance

·   Favorable analyst ratings and a price target increase

·   A positive dividend track record vs peers and a present 8% dividend yield

·   A P/FFO ratio below the sector median

·   A favorable DIP contract with Lavie

·   The leading Healthcare REIT over the past four weeks

·   A strong year-to-date return

·   A recent 50-day moving average cross above the 200-day moving average

Over the long term, Omega Healthcare remains an excellent REIT to purchase, especially for investors seeking solid income. Shorter-term traders may want to wait for a pullback for a better price point, as the price has risen far above its 50-day moving average.

Are You Missing Out On Higher Yields?

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For example, the Jeff Bezos-backed investment platform just launched its Private Credit Fund, which provides access to a pool of short-term loans backed by residential real estate with a target 7% to 9% net annual yield paid to investors monthly. The best part? Unlike other private credit funds, this one has a minimum investment of only $100. 

Don't miss out on this opportunity to take advantage of high-yield investments while rates are high. Check out Benzinga's favorite high-yield offerings. 

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