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Omega Healthcare Investors Inc. Message Board

  • danarmstrong71 danarmstrong71 Jul 11, 2012 3:40 PM Flag

    OHI 3Q Dividend Outlook

    OHI is scheduled to declare the 3Q dividend over the next several business days (normally July 15th), which brings up the question of whether there will be another increase and if so how much. OHI set a pattern of sequential dividend increases in 2011, a trend that has continued in 2012 with $0.01 bumps in both 1Q and 2Q. I think the dividend will go up at least another penny to $0.43 in 3Q, but could go to $0.44. Keep in mind that management’s FFO guidance is $2.09 - $2.12, so a full-year dividend of $1.73/share (for argument's sake) results in a payout ratio of roughly 82%, which is right in the middle of OHI’s typical payout range. Since the bottom end of earnings guidance was raised on the last call, perhaps we should be looking for a dividend of $0.44 this quarter, but we’ll know soon enough.

    One technical item of concern with respect to cash flow and dividends was a large increase in straight-line rent in 1Q, which totaled $6.5 million or 11.5% of the $56.9 million of management-adjusted FFO. For those not familiar with straight line rent, it is best described as non-cash rental income, with the actual cash being contractually deferred until some date in the future. You certainly don’t want to pay current dividends out of non-cash revenues, because collection of these long-term receivables can be iffy. Hopefully we’ll hear more about SL rents on the earnings call, what’s driving the sudden increase, and whether it might affect future dividend policy.

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    • OHI released its 10-Q today, which shows that straight-line rent continued at a high level in 2Q'12 ($6.5 million or 7.9% of total revenues). So looking at OHI's real economic earnings, it would be $55.803 million of reported FFO, less a $1.698 million accounting gain, less $6.579 million of non-cash revenues. That gets you to $0.45/share, out of which OHI declared the $0.42 dividend. Using my math, the payout ratio is about 93%, which is acceptable, but different from the 80-85% payout ratio cited by management using their "Adjusted FFO."

    • OHI declared a 3Q dividend of $0.42 (payable August 15), flat to 2Q'12 and up 5% from a year ago. We'll find out in a few weeks whether the more cautious stance is due to a change in guidance (less likely), the Board desires to be more conservative on the CAD payout ratio (maybe), or there's a secondary coming and better to hold off on the next increase (good possibility).

      With three dividends known for 2012, we seem to be on a trajectory for $1.67-$1.69 for the full year, which is still a nice growth rate over the $1.55 paid in 2011.

    • ok now we know. no increase this quarter

    • I'm expecting the conservative increase of .o1

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