Omega Healthcare relies on baby boomers

The next boost for the paper will be provided by the baby boomers born between 1964 and 1964, who are increasingly reaching retirement age. CEO Taylor Pickett, who has headed the US company since June 2001, buys existing assisted living facilities, leases some of them to their former owners and provides them with the money for modernization. He pays attention to an initial yield of around 9% and annual rent increases of around 2.5%.

The Ostküstler drove very well with this business model. Over the past 17 years, earnings and dividends have been steadily increasing. In Q1, Omega Funds From Operations (FFO) generated $ 0.79 per share and paid a dividend of $ 0.67 per paper. While that was above expectations, the company’s fairly high leverage, which is currently around five times its EBITDA, caused uncertainty among shareholders at the start of the corona pandemic. The paper crashed down to $ 13.30, in which we had already invested in late 2017 / early 2018.

For a REIT, however, the EBITDA leverage is by no means excessive in the current low interest rate phase; In addition, by stopping a share buyback program and utilizing existing credit lines, the Americans have created another liquidity cushion and there have been hardly any defaults on rent. Investors are therefore once again paying more attention to the expected annual FFO growth of almost 11% and the excellent dividend yield of almost 9%.

We recommend that you join Omega Healthcare again. We set the stop at $ 23.95.

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