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.