Omega's fixable operator troubles have led to a grotesque
mispricing in the health care REIT's shares in the last three weeks.
The market appears to have less confidence in the health
care REIT’s dividend prospects after its AFFO guidance was lowered.
Investors reacted largely emotionally to the guidance
revision. Omega Healthcare Investors' shares are widely oversold, making them
ripe for a technical rebound.
Omega Healthcare Investors easily covers its dividend with
recurring cash flow. The dividend is NOT at risk, not even if AFFO
year-over-year growth will be zero.
An investment in OHI comes with a 9.6 percent entry (!)
yield and ~20 percent upside.
Health care REIT Omega Healthcare Investors (OHI) reported
worse-than-expected third quarter earnings at the end of October which resulted
in a steep drop in the company's share price. Omega Healthcare Investors
revealed (temporary) problems with one of its tenants, Orianna Health Systems,
and lowered its full-year AFFO guidance as a result. The market currently seems
to price a dividend cut into the REIT's valuation. Lack of a rebound in
valuation is a good opportunity for contrarian-minded income investors to
gobble up shares on the cheap.
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