One way income investors can make wise decisions about which dividend stocks to buy is by studying a company’s past history. Was there a dividend increase? Have there been any dividend suspensions or cuts? What is the average dividend yield over time?
It is often useful to use a five-year term when evaluating a company’s dividend history. With that said, here’s an analysis of a stock with a solid dividend payment history since September 2017.
Omega Healthcare Investors Inc. (NYSE: OHI) is a Hunt Valley, Maryland-based healthcare real estate investment trust (REIT) that has owned and operated assisted living and skilled nursing facilities since 1992. Its 921 facilities are spread across 42 states in throughout the US and has one facility in the UK.
As a REIT, Omega is required by law to return at least 90% of its taxable income to its shareholders. Therefore, like many other REITS, Omega has paid its shareholders a fairly high dividend yield throughout its history. The current annual dividend of $2.68 yields just over 8.2%. Beta on Omega is 0.97, or slightly less volatile than the US stock market as a whole.
If you invested $10,000 in Omega stock five years ago, you would have bought 308 shares for about $32.46. Your first quarterly dividend payment of 65 cents per share would have been paid at the end of October 2017 and you would have received $200.20.
Over the past five years Omega has slowly increased its quarterly dividend payment from 65 cents to 67 cents. Total dividends paid over five years on 308 shares would have been $13.31 per share, so you would have received $4,099.48. Your total investment will now be worth $14,099.48 or a 41% return.
Ironically, Omega’s current price of $32.42 is almost the same as it was five years ago. The stock reached $36.50 and $18.68 during that five-year span, but it’s clearly not the type of stock from which investors can expect much appreciation.
Check Out: This little-known REIT has produced double-digit annual returns for the past five years
However, if you had reinvested Omega shares in a dividend reinvestment plan (DRIP), your original 308 shares would have grown to 464.74 shares for a total return of 50.67%, or an average of 8.54% per year. You will now have $15,065.30.
So, to summarize, Omega is a low-volatility, slow-growth income stock that’s suitable for long-term income investors — especially if they don’t need immediate income and have the ability to reinvest their dividends over several years.
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