One Raise at a Time | 23 Consecutive Quarters
On January 16th the Board of Directors at Omega Healthcare Investors (OHI) approved another increase to their quarterly dividend payment. The dividend was increased from $0.65 per share to $0.66. That works out to a 1.54% increase from the prior payout. Omega Healthcare Investors is a Dividend Contender with 15 consecutive years of dividend increases. Shares currently yield 9.63% based on the new annualized payout.
That increase might seem a bit small at just 1.5%; however, Omega Healthcare Investors typically gives a small increase with each quarterly payout. In fact they've given a raise for 23 consecutive quarters dating back to November 2012. Compared to the same payout as last year the dividend has increased 6.45%.
Since I own 84.706 shares of Omega in my FI Portfolio this raise increased my forward 12-month dividends by $3.39. This is the 21st dividend increase I've received from Omega Healthcare since initiating a position in March 2015. Cumulatively since I first bought shares my dividends have increased by 22.2% through organic dividend growth alone. According to US Inflation Calculator the cumulative rate of inflation over that same time is just 4.0%. That's dividend growth investing at work.
A full screen version of this chart can be found here.
I like to examine the dividend growth rates that a company has doled out over time in order to see whether dividend growth is holding steady, increasing or decreasing. Looking at this gives you an idea of the possible future direction of dividend growth.
Omega Healthcare Investors has paid and raised dividends every year since 2003. The yield has typically been 6% plus during that time so you would expect that dividend growth would be slow. However, that's not been the case for Omega Healthcare with annual raises coming in at 7%+. For a 6% starting yield that's huge growth.
|Omega Healthcare Investors (OHI) Annual Dividend and Rolling Dividend Growth Rates|
A full screen interactive version can be found here.
Over the last 6 months or so Omega Healthcare Investors share price has been on a slow grind lower pushing the yield up to 9.63%. Seeing a yield that high is definitely a cause for concern. Omega Healthcare operates as a landlord primarily for skilled nursing facilities. Unfortunately there's some very real concerns about whether those tenants will be able to keep making their rent payment which has been an anchor on Omega's share price dragging it lower. If the tenants' issues are resolved then this marks a great buying opportunity; however, a nearly 10% yield isn't something that typically last for too long. More research is definitely needed with this one.
My forward dividends increased by $3.39 with me doing nothing. That's right, absolutely nothing to contribute to their operations. Based on my portfolio's current yield of 2.56% this raise is like I invested an extra $132 in capital. Except that I didn't! One of the companies I own just decided to send more cash my way.
That's how you can eventually reach the crossover point where your dividends received exceed your expenses. That's DIVIDEND GROWTH INVESTING AT WORK! The beauty of the dividend growth investing strategy is that you build up your dividends through fresh capital investment as well dividend increases from the companies you own.
So far in 2018 I've received 2 dividend increases from the companies owned in my FI Portfolio raising my forward 12-month dividends by $10.87.
My FI Portfolio's forward-12 month dividends increased to $5,871.86. Including my FolioFirst portfolio's forward dividends of $77.16 brings my total taxable accounts dividends to $5,949.02. My Roth IRA's forward 12-month dividends are at $336.21.
Do you own shares of Omega Healthcare Investors? Do you believe the dividend is sustainable or is it poised for a cut?
Please share your thoughts below.