Recent Buy

buyMr. Market sure can be a moody fellow. Over the course of even just a day he can go from absolutely ecstatic about stocks to downright depressed about them. It’s really quite silly.

But I’m consistently upbeat about the long-term prospects for high-quality businesses that provide ubiquitous products and/or services that people and/or businesses demand. You know – businesses that are so increasingly profitable year in and year out that they basically bleed excess profit, returning a good chunk of their growing profit to shareholders in the form of increasing dividends.

Not much to be moody about when we’re talking about great businesses doing what they do best and sending larger and larger checks my way. As such, I’m consistently acquiring shares in these businesses, building my passive dividend income in the process.

And I just added a significant chunk of passive dividend income by taking advantage of one of Mr. Market’s moods, seeing as how he appears to be discounting quality merchandise.

I purchased 30 shares of Omega Healthcare Investors Inc. (OHI) on 9/1/15 for $33.05 per share.

Overview

Omega Healthcare Investors is a self-administered real estate investment trust that provides capital and financing to the long-term healthcare industry, with a particular focus on skilled nursing facilities in the US.

After a recent merger with Aviv Reit Inc., the combined company has a portfolio of over 900 properties across 41 different states and the United Kingdom, operated by 84 different third-party operators. They are now by far the largest player in the SNF space, with more than two times the number of properties as that of their closest competitor.

They were founded in 1992.

Averaging Down After A Stellar Quarter

OHI is down almost 10% over the last month, which strikes me as a pretty incredible opportunity.

It was just over a month ago that the company reported its fiscal year 2015 Q2 results. And the results were rather stellar across the board.

Revenue came in at $197.7 million, which is 62.3% higher than Q2 2014. Even factoring out the dilution from the Aviv acquisition, revenue was 6.3% higher year-over-year.

Funds from operations was hit by acquisition costs, but adjusted FFO/share (which factors out the acquisition costs) was up 11.6% YOY, coming in at $0.77.

Meanwhile, Omega announced multiple investments, including $112 million of real estate in Manhattan for the development of a senior housing community. They also completed $178 million of new United Kingdom investments.

And they continue to take care of shareholders in the form of a large and growing dividend. And not just a growing dividend, but one that continues to increase quarterly. They’ve increased their dividend three times this year, for a cumulative increase of 7.8% YOY. That dividend growth is obviously very attractive when you consider the stock yields 6.66% here.

I added to my position in this wonderful REIT back in May for $35.39 per share. So I was ecstatic to see it drop down to $33 per share. Even after this transaction, I still have room in the portfolio for a larger slice of Omega, so I’m hoping that the stock drops even more from here. As long as I’m acquiring shares, I look forward to cheaper prices so that my capital goes further, buying an even higher yield which puts me that much closer to my long-term goals.

Risks

I see the major risks for OHI revolving around the very industry they operate in. A significant portion of their operators’ revenue is derived from government reimbursement, primarily through Medicare and Medicaid. Any major fundamental change there could impact the operators’ ability to pay OHI.

While OHI’s credit ratings are investment grade, they are lower on that scale. Any downgrade could cause their cost of capital to rise substantially. In addition, any rise in interest rates could negatively affect their cost of capital, though this is true for any business that relies on borrowing for growth.

Lastly, there is integration risk with the recent AVIV acquisition. This acquisition is incredibly large, so it remains to be seen how well the two entities work together in terms of synergies and growth. As it stands, OHI anticipates that the transaction will be immediately and significantly accretive to FFO.

Valuation

OHI’s P/FFO ratio is 13.11. And that’s factoring in Q2’s acquisition costs, which were somewhat substantial. Factoring those costs out, the P/FFO ratio is closer to 11.97. Either way, the stock appears to be quite cheap to me. The P/FFO ratio is comparable to the P/E ratio that one would use for C corporations. The yield is currently higher than the five-year average, even while that average includes a rather lengthy period of time where the stock was half its current price. So, in my view, the stock has gone from ridiculously cheap to less cheap. Not surprising with the way the market has advanced over the last five years. Still a lot of value here, though, from what I can see.

I valued shares using a dividend discount model analysis with an 8% discount rate and a 4% long-term dividend growth rate. That growth rate is quite conservative as it’s less than half that of OHI’s long-term dividend growth track record, but I’m modeling in the fact that REITs require the heavy use of leverage and equity issuance to fund growth. The DDM analysis gives me a fair value of $57.20.

Conclusion

Omega has been an incredible performer over the last decade, generating an annualized total return of just over 17% for shareholders (even after recent volatility). Combine a yield over 6.5% and dividend growth in the low double digits, and that’s what you tend to get. Chronic undervaluation over many years helped as well. Looking at more recent dividend growth (and a yield that’s still very high), one can see how this stock should continue to do very well for shareholders in terms of both aggregate dividend income provided and total return going forward.

The stock is now down more than 17% YTD, which appears to be due to a combination of broader market volatility and fears of rising interest rates. Rising rates or not (which will affect all businesses), skilled nursing facilities aren’t going to see their demand materially change. Elderly citizens who require specialized care aren’t going to up and leave in droves because rates rise by 0.5% or 1%. So keep that in mind.

As I mentioned above, I still have more room for this REIT in the portfolio. If the price drops even more, I’ll likely add, dependent on capital availability. I now have 105 shares of OHI, but I can see myself finishing the position off at maybe 140 or 150 shares. I’m keeping my fingers crossed we see $30/share soon!

This purchase adds $66.00 to my annual dividend income, based on the current $0.55 quarterly dividend.

I usually include current valuation opinions from other analysts, but neither Morningstar nor S&P Capital IQ follow this stock.

I’ll update my Freedom Fund in early October to reflect this recent purchase.

Full Disclosure: Long OHI.

What do you think of this REIT? Think the value is there? Like the yield? Buying here? Why or why not? 

Thanks for reading.

Photo Credit: Stuart Miles/FreeDigitalPhotos.net

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165 Comments

  1. Jason

    great buy, as mentioned in my last comment, we have become fellow shareholders last week here!

    Not sure how people believe FED rates are relevant to their business model. In the 10-K of OHI and WPC FED rates (or any other central bank rates) are not listed under risks…

    Just added 17 shares of WPC today and hope the market will stay moody.

    Regards

    Philipp

  2. Nice buy. I bought some on Friday myself. Curious why sometimes you use 8% discount and sometimes you use 10%. There doesn’t seem to be any rhyme or reason when you use one or the other. From my opinion, you should consistently use the same discount rate, since each of your dollars compete for each investment. I wouldn’t invest $100 in something that I use a 4% discount rate when I could invest that same $100 in something I’m using a 10% discount rate for. Curious to see your reasoning, though.

  3. Love the company and if it wasnt already at a full position in my portfolio, I would buy more. Congrats on adding 30 shares at a great valuation level.

    Best
    R2R

  4. There has been some great buy opportunities out there. I will have to add Omega Healthcare Investors to my watch list. I do not have any exposure in the health care sector yet. Their share price is very attractive. There are to many choices with stock prices being corrected. Thanks again for the excellent analysis.

  5. OHI looks like a great buy – revenue up, acquisition hurdle overcome, and $184 Million in New Investments in July 2015 alone. Nice price point to average down into and this may be one of my Sept. purchases. Like always, nice detailed analysis Jason!
    Rich

  6. Philipp,

    Glad to be a fellow shareholder here. 🙂

    Rising interest rates could affect OHI in two different ways. First, it makes their debt more expensive to service. Second, it possibly makes the stock less attractive in a world where low-risk investments offer higher yields. Again, rates will affect all businesses, though those with higher use of leverage will feel more pain. All in all, however, I’m not particularly concerned. The cheaper the stock, the higher the yield. And I wouldn’t mind at all nabbing more OHI at a 7%+ yield. We’ll see!

    Cheers.

  7. took2summit,

    There’s rhyme and reason, which I’ve gone over before.

    I use a 9% discount rate for stocks with a yield between 4% and 4.99%. And I use a discount rate of 8% for stocks with a 5% yield or higher. It’s due to the time value of money and my preference for more yield now. A yield of 6% is obviously worth more to me than a yield of 2%, and I’m willing to take on a lower return to get that higher yield to move me closer to my goals. Of course, that probably won’t turn out like that in real life, as I discussed in the article.

    But you’re free to value stocks how you wish. That’s just my valuation and what the stock is worth to me.

    Take care.

  8. Good purchase. I own some OHI too. I looked hard at both OHI and HCP when it came to finding a health care REIT, but I decided I liked OHI a little better. What the heck, maybe I’ll buy some HCP too some day.

  9. More on OHI? Good job. It is hard to ignore their attractive valuation. I would love to initiate my position at some point when US dollar gets cheaper as compared to Canadian dollar. Good job Dividend Mantra!

    Cheers,

    BSR

  10. R2R,

    I’m fortunate that I have a little more room for some REITs here, including OHI. If we see OHI come down another 10%, I’m loading up again. 🙂

    Thanks for dropping by!

    Best regards.

  11. FF,

    I hear you. A lot of choices out there. It’s good to be a dividend growth investor! 🙂

    Have fun over there with the shopping. Hope you’re able to nab some solid opportunities.

    Cheers.

  12. Rich,

    We’ll see how it goes, but OHI has done everything they said they were going to since I first invested. The quarterly raises are wonderful when you’re looking at a yield this high. I’d take a lower dividend growth rate, but I’m more than happy with this kind of growth on top of that sky-high yield. 🙂

    Thanks for dropping by!

    Best wishes.

  13. BSR,

    Definitely more OHI here. And I wouldn’t mind another tranche at a lower price point. Keeping my fingers crossed for that. 🙂

    Appreciate the support. Let’s stay busy!

    Cheers.

  14. Jim,

    Both solid REITs there. I like the higher yield and stronger dividend growth with OHI. The valuation was more attractive as well, last I knew.

    Glad to be a fellow shareholder. Loving that yield, especially when backed by high-quality fundamentals.

    Best wishes!

  15. tom,

    Wow, you’re a serious shareholder over there. Nice! 🙂

    Can’t say OHI is 14% of my portfolio (or ever will be), but I’m pretty enthusiastic about the REIT. Definitely wouldn’t mind another 40 or 50 shares. We’ll see how it goes.

    Thanks for stopping in.

    Cheers.

  16. Awesome Jason! After the last market drop off, I intend for this to be my next purchase as well. I am hoping to grab about another 15 shares.

  17. Mike,

    Sounds like a good move there. I’ve been buying up some stocks with somewhat low yields lately, so it felt good to get back on the train here and really move that dividend income forward in a big way. OHI offers not only that incredible yield, but also dividend growth that’s competitive with some of the best stocks out there. Not much to dislike.

    Best regards!

  18. Hi Jason,

    Nice buy there. I would buy it for myself but my exposure to REIT’s is already to big.

    Cheers,
    G

  19. Geblin,

    I hear you, my friend. I didn’t start buying REITs until the portfolio was already fairly large, so I still have some room there. But if your exposure is already too much, that means you’re probably already generating some substantial dividend income. Sounds like a win to me. 🙂

    Cheers!

  20. Any thoughts on BX (Blackstone)?

    It’s taken a nice dip since May down to the $35 range. Dividend yield nearing 8.5%+, low PE of 8.5

    I realize it doesn’t have a long history track record like most of your picks but it’s very profitable, well run by some incredibly smart people and they have the largest portfolio of real estate in the private sector. Plus, picking up those 50,000+ single family homes at a steep discount over the last few years.

  21. A very smart buy. After I have finished with BBL I´m thinking about all the healthcare REITs. I own some OHI and there is really a lot to like. My target for OHI is same like BBL to own at the end 250 shares. So I have a lot to do to reach that goal. I´m also interested in HCP, but they are only on my watchlist. SNH seems a little risky, and I´m not sure to start a position with that.

    Some solid investments with high dividend income is always a good buy. We have so many opportunities that we can´t take them all. But this is a really nice situation.

  22. Scott,

    I don’t really have any thoughts on that one. I only track a few stocks that don’t have lengthy dividend growth records, and BX isn’t one of them. Took a very brief look at it some time ago and just didn’t really get how all of their segments worked together. I prefer conservative asset managers, generally speaking. They tend to do well through all cycles.

    Take care!

  23. olli,

    Yeah, we can’t afford all of the opportunities at all times. Fortunately, though, it’s not necessary. Building up a portfolio that should generate enough dividend income to live off of doesn’t really even take that long if you’re saving a large percentage of your net income. Get that savings rate high enough, plow a ton of capital into those high-quality dividend growth stocks, and you won’t even know you missed some opportunities along the way because you’ll likely naturally end up with a great collection of businesses sending you dozens of checks regularly. 🙂

    Keep it up over there!

    Cheers.

  24. Great minds think alike, just today i bought also a healthcare REIT! It was hcp. I now own O, OHI, WPC and HCP as REITS. Do you think you’ll be picking up HCP anywhere soon? Maybe ill be adding to OHI next month. Keep it up buddy!

  25. FS,

    Great minds do indeed think alike. 🙂

    Not sure I’ll be buying HCP any time soon. OHI offers a higher yield and better dividend growth. And I believe it’s cheaper as well, last I looked. But HCP has a great track record over there. Tough to go wrong with some of these names.

    Keep it up over on your end as well!

    Best regards.

  26. “You know – businesses that are so increasingly profitable year in and year out that they basically bleed excess profit, returning a good chunk of their growing profit to shareholders in the form of increasing dividends.”

    Hence why my aim is to be constantly drenched in blood.

    I copied and pasted your statement to give mine some context, lest someone calls the FBI or something.

    Great move on OHI. I myself averaged down on BBL and EMR while initiating positions in UNP and MMM today. I’m already planning for OHI to be part of my next set of purchases when I get the capital. Hopefully we’ll get an extended market correction. A rise in the interest rates might also do some good for REIT investors. I imagine it will drop the price of OHI and the others in the short term, and they will just increase rents to make up for the increase in their mortgage payments. I believe that the Fed will be making an announcement on September 17 as to whether they will increase the rates or not. I try not to pay too much attention to macroeconomic factors, but I recognize when they might have some impact on a business I want to buy.

    Here’s hoping we’re practically drowning in blood soon!

    Sincerely,
    ARB–Angry Retail Banker

  27. ARB,

    Ha! If the FBI comes after us, we’ll know we really made it. 🙂

    Nice job over there. Staying consistent, adding to the snowball, and moving forward at every opportunity is the way to do it. Great businesses over there.

    We’ll see what happens with the announcement. They could just as well announce nothing, or a very small increase, and REITs could pop up. Or they announce a modest increase and REITs drop. I don’t really care either way, but I am hoping that some of these REITs continue to drop. I still have some room for more OHI. O is another one I’d like to pick up more of. Keeping my fingers crossed!

    Thanks for dropping by.

    Best wishes.

  28. Health REITs are my favorite REITs to invest in. OHI continues to be on my radar but for now I’m still focused on the large health REIT plays, HCN, HCP, and VTR. No doubt you have access to some great growth with OHI in a sector that should have a nice tailwind for at least the next two decades. Have you considered any apartment REITs like AVB?

  29. DH,

    I’m with you. Many of the healthcare REITs feature outstanding yields, great dividend growth, excellent fundamentals, and lengthy track records for dividend raises. Fertile ground for us. 🙂

    I haven’t considered any REITs that focus on multifamily properties. Not something I’m ruling out, but I feel pretty good with the four REITs I own. I might pick up a fifth, but it’s also not necessary for my allocation. We’ll see.

    Thanks for dropping in!

    Cheers.

  30. DM,

    I have a question about the dividend from OHI. Why do they pay $0,36 on March 27, and $0,18 on April 28? Is this form of payment every year now, or just once?

    Best regards,

    DF

  31. Great buy man, can’t go wrong with OHI. It’s my largest holding and it sure pays a fat dividend! I’m tempted to buy up even more shares at these prices, which are ridiculously discounted in my opinion, haha!

    As always, keep it up.

    Cheers

  32. Good Day Jason
    I have been buying my REITs stocks on the way down O, VTR and WPC. I like the companies and the dividends. OHI is another high quality stock with a good dividend. I think you did yourself a great service by buying down on OHI. adding more dividends, and reducing your cost basis to OHI that’s sooo awesome. I have been looking to add another name to my portfolio and this stock is on the list. My list of stocks i want to buy is far greater than my capital. again congrats on OHI. I am enjoying reading your journey.

    Cheers

  33. This buy is rather difficult to me comment since it it a kind of stock thah we don’t have in Portugal, where I live.
    I looked at finance.yahoo and Total Debt/Equity=84. That’s huge!
    On the other side, Operating Margin is really big too.

    Good luck and thanks for one more post!

  34. Hi
    OHI is a good reit choice I have been watching them for a while myself. I picked up BMR at a good price a while back and may add OHI to round out my health care section of my portfolio. I like reits they make up 10% – 15% of my portfolio at any time.
    Ive been watching WY for a while but not sure were that one would fit in …. We will see 🙂 I enjoy researching diff companies and how they fit my longer term plan 🙂

    Invest on 🙂

  35. Jason,

    Awesome job taking advantage of the volatility and averaging down. OHI is on my watch list but I have a few other names ahead if it for now. We’ll see how Mr. Market is feeling over the next few weeks!

    Cheers

  36. Alex,

    I’m with you. Hoping to scoop up even more shares here over the near term. Definitely have some more room there. 🙂

    Glad to be a fellow shareholder alongside you. Very enthusiastic about their prospects. Meanwhile, we’re collecting a very attractive dividend.

    Best regards!

  37. Tawcan,

    OHI is very appealing here. Very glad to pick up a few shares. If rates rise over the near term, could be even better opportunities down the road. I’m sure we’ll be there to scoop those opportunities up. 🙂

    Cheers.

  38. Michael,

    This purchase didn’t actually lower my cost basis. I was fortunate to buy some shares a while back at an even cheaper price. But I’m very happy to be able to load up in the low $30s. I don’t think I’ll be unhappy with that over the long haul. But if we see the stock drop to $30 or lower, I’ll be all over it. 🙂

    I hear you on opportunities/ideas exceeding available capital. That’s a problem I’ve been dealing with for almost six years. Definitely a first world problem, but a problem, nonetheless. We just buy what we can when we can.

    Keep it up!

    Best regards.

  39. Nuno,

    That number from Yahoo Finance is wrong. I went over liabilities and equity in the analysis I performed in May. It’s nowhere near that, which is comically high.

    As always, I recommend going right to a company’s financial statements for yourself.

    Cheers!

  40. Bob,

    Invest on, indeed. 🙂

    I also enjoy the analysis. It’s fun for me. Those that complain about how time consuming it is to look at stocks should probably just buy index funds. It’s not for everyone.

    Thanks for dropping by. Have fun over there!

    Best wishes.

  41. RTR,

    I’m hoping Mr. Market becomes even more depressed. Hate days like today where we see the market jump by 2.5%.

    Let’s keep our fingers crossed that we see a 10% drop here pretty soon.

    Thanks for the support!

    Best wishes.

  42. LOMD,

    Nice way to stay busy over there. Love it! 🙂

    Great companies as well. I’ve been pretty busy, with this OHI buy being one of the three I initiated over the last week. We’re so fortunate to be able to regularly put plenty of capital to work.

    Keep up the great work. Enjoy that big addition to your annual dividend income.

    Cheers!

  43. Dividend Mantra,

    Great buy. The REITs have taking a kicking lately. But if you believe in the company and financials are still sound, it is a excellent time to pick them up.

    The REITs I own have dropped a lot, so they have popped up on my radar for possible future purchases in the near future.

  44. IP,

    Many REITs have been absolutely hammered lately. Some of that might be in advance due to fears over rising rates, so one has to wonder how much of that might be priced in. But I really just look at it from the perspective of long-term prospects and valuation. Maybe they become cheaper. Maybe not. But I’ll be collecting that monster yield, either way. 🙂

    Happy shopping over there when you’re ready!

    Best regards.

  45. Hi Jason,

    The ESP we share is still close. I’ve had OHI for a year now. Love the growing dividend! But I just bought ORI today (90 shares).

    Enjoy your shopping spree!

    John

  46. Thanks! I think I asked you about this stock a few days ago and you send a like to a pdf about how integer hike affect this stock. You answer all my questions here. Will pick up some soon here!

  47. Jason I have watched OHI for years a solid company. I noticed you tend to not invest additional capital to O. When compared to your other REITS. Not really questioning you’re thinking (to each, his own) just commenting. I tend to really like the company, management, business, and the monthly dividend. I wish more people did.

    Full disclosure I am biased towards my love of O.

  48. chickenwizrd,

    I’m with you. Love that dividend growth. Quarterly raises are great, but the cumulative growth is really impressive. Especially on top of that yield.

    Definitely enjoying the shopping spree over here. Hope the same for you! 🙂

    Cheers.

  49. Sunny,

    I definitely like O as well. But the valuation, yield, and dividend growth all tilt substantially in OHI’s favor. On paper, it’s not even close. In addition, I’m a little more cautious about that heavy exposure to general retail. But I wouldn’t mind another tranche of O at some point. 🙂

    Thanks for dropping by!

    Cheers.

  50. Nice purchase at nice price, DM! I really like OHI and built up good position over a period, along with VTR, SNH and WPC. I may add to OHI if price further correct. Keep racing towards FI.

  51. DM,

    Big Move! Adding 30 shares has a nice ring and round number to it – congratulations and nice job. Further – great results, great quarter and if they provide even more income for what you are purchasing – then heck yah, sounds like more than a win in my book. Adding over $60 in dividend income from one purchase such as this is awesome. Further – buying them almost 10% less than when you bought them in May – great job averaging down.

    Excited to see what the month holds for us. Good luck and keep going Mantra!

    -Lanny

  52. R2R,

    Glad to be a fellow shareholder with you. OHI has served shareholders very well over a long time now, and they’ve certainly done well by me since I’ve been a business partner.

    Let’s hope that continues. 🙂

    Cheers.

  53. Lanny,

    I love seeing a company post up a really great quarter and then seeing the stock plummet because of… whatever. I’m always happy to be there with some capital when something like that happens. 🙂

    Thanks for all the support. Let’s keep it moving!

    Best wishes.

  54. Hi Jason,

    Great buy. I have a question for you- what do you think of ROST (Ross Stores) as a Stage 3 Dividend stock?

    Keep up the great buys, you are growing that snowball!

    -Mike

  55. Jason, do you have a personal rule how often you buy into falling stocks? I personally decided for me, that I will never average down unless I did not specifically plan to do so in advance. The risk of buying the losers is in my opinion to high. We always tend to think that the stocks that we already own are awsome!

  56. Hi ! very nice post, thanks
    How do you deal before buying companies that cut the dividends for example OHI, in 2002 recession? Do you check those things? Because i wanted to buy Realty Income (O) but it seems valued higher than OHI.

  57. Jason
    Nice that you are still on course and realize that market fluctuations are a part of life. They are not to be seen as joy or despair. Your focus allows you to stay on course.
    I ,myself ,do not look to own REITS . I look for only qualified dividends as there is a tax advantage to my receiving only qualified ones.
    You are setting a good example for those just starting out and trying to accumulate a passive income stream.

  58. Butterfly
    Watch trading volumes in relation to price changes. It’ll refine your decision making process.

  59. Jason,
    Thanks for sharing this analyis with us. I will use it to buy more OHI today if the price are ok. Nice to have so many good bloggers accross the atlantic to help out with what stocks to buy. I know the risk in my philosophy but i think you and your community are doing a much better jobb then i can do at the US markets. I tried to analys JNJ but i struggled alot to understand everything. I will keep trying to analys PG and Unilever and see if i can do any better. A US REIT will be out of my leauge to fully understand at the moment.

    Allt gott from Sweden
    /DanielWikstrom

  60. I have worked as a Nurse in assisted living & I know plenty of RN’s who work in long term care. I can tell you that a lot of these places are packed with people. These long term care facilities are money making machines & with an aging population the long term care facilities will benefit. A stellar choice.

    Andrew
    SHM

  61. Mike,

    Great stock there. So is TJX – a very similar company/stock. Not sure how exposed I want to be to retail in general, especially specialized/niche retail. But they’ve done very, very well. I can’t imagine shareholders have any complaints. 🙂

    Thanks for stopping by. I hope (but already know) all is well!

    Cheers.

  62. BM,

    Right. That’s why you want to pay attention to fundamentals. If a stock drops by 5% or 10% from your last purchase price or cost basis and the fundamentals are relatively unchanged, then you should probably be salivating at that.

    But if a company is experiencing issues that aren’t short-term in nature or are otherwise problematic in a major way, that’s when you have to really step back and think about things. Investing isn’t something that’s automatic/thoughtless. You have to think about what you’re doing at all times.

    Hope that helps!

    Cheers.

  63. mar,

    There was no recession in 2002 that I’m aware of. They actually eliminated the dividend back in 2000 and resumed growing it in 2003. But I guess you have to ask yourself if Omega going forward is in good condition to continue paying and growing its dividend. I’m not investing in the Omega of 2000. I’m investing in Omega of 2015 and the Omega of the future. We don’t invest in where a company’s been, but where a company is going.

    That said, there was a confluence of debt due and a change in reimbursement back then. That reimbursement change harmed operators’ ability to pay Omega. As noted in the article, any changes in reimbursement is a risk. Of course, there is risk with any company/industry. It’s up to you to determine the level of risk there and whether the return is worth it.

    Hope that helps!

    Best regards.

  64. Amegalo,

    Not only do market fluctuations not bother me, I look forward to them. As I’ve said over and over again, short-term volatility is a long-term opportunity.

    Let’s just hope the market drops rather significantly once more before the end of the year and then holds it for a while. 🙂

    Thanks for dropping by!

    Cheers.

  65. Daniel,

    Thanks for dropping by from Sweden!

    It takes time to get the hang of things. Nothing wrong with that. Over time it’ll become easier. And if you enjoy it (like I do), that makes it that much easier. 🙂

    Good luck over there honing your craft.

    Best wishes.

  66. DAC,

    Glad to be a fellow shareholder with you! 🙂

    I wouldn’t worry about being too early or too late. Timing doesn’t really matter. You’ll forget all about it over time.

    I initiated my position in Omega in January 2014. Do I have any idea what the stock did the day after? Or the week after? No. No idea. Doesn’t matter.

    Just keep averaging your way in over there.

    Best regards.

  67. secondhand,

    Thanks for the inside scoop. That jives with everything I’ve read about the industry. I can’t see demand declining any time soon. 🙂

    Cheers!

  68. Hi Jason,

    Things are going fine over here. Well, a little too busy with work at the moment but I’m going to tough it out for a short spell while I stay aggressive in building up the passive income targets.

    I’ve been eyeing CL as it’s been cooling off slightly but isn’t cheap at a P/E of 25 or so (it never seems to get cheap). I know you wanted to add this to your position at some point. What would you calculate as fair value for the stock? This is a company that I’d like to pick up long term as I see the use of their products mushrooming in Asia and find it to be a great business model…. at a fair price.

    If I look at the last 10 years of earnings and dividend payments one may assume a 7-8% growth rate and that would imply a fair value in the low 70’s. Is this company on your watch list at present?

    Thanks,

    Mike

  69. Congrats on another fine purchase! I just got my first dividend from OHI and that monster yield showed its strength right off the bat. I’m a big fan of the company and can’t wait to reap the rewards alongside you for years to come 🙂

  70. Mike,

    I took a quick look at Colgate not too long ago:

    http://dailytradealert.com/2015/07/23/this-stock-has-raised-its-dividend-for-52-years-in-a-row-2/

    I was conservative with the dividend growth rate due to the fact that EPS has compounded at a rate under 8% over the last decade. But things could ease for them moving forward. Nonetheless, I don’t see anything that would indicate the stock is undervalued, or even fairly valued. Might just be one of those stocks you have to pay that premium for. One could do worse than pay a little too much for a company like Colgate. And it’s a lot cheaper now than it was recently.

    Best regards!

  71. Ryan,

    Ha! That’s fantastic. Glad you’re enjoying that big payment already. Love seeing those big payments hit the account. 🙂

    Looking forward to owning this one for many, many years.

    Best wishes!

  72. Hello and greetings from the top of Europe. Long time reader and first time commentator here.

    Would love to buy some OHI at this price, but sadly the dollar is way to strong against the norwegian krone. Hopefully the Oil price will rise again soon and the krone gets back it’s strenght so i can grab those good deals!

    Keep up the good work 🙂

    Norwegian guy

  73. Hi Jason!

    Great motivation as always! I’m just registering with a broker to buy stocks in the US! Cant wait to start buying some of the same companies as you!

    Quick question which I cant see in you portfolio.. – Business Development Company’s…

    High Yields and there are some great buys out there like Main street capital who have raised there monthly dividend since 2007 through the financial crisis!??

    Would you consider buying Business Development Company’s???

  74. Or you could just buy oil? It´s funny, I´m currently looking at norwegian stocks since NOK is at a low point to SEK. Den enes död den andres bröd. 🙂

  75. Hello!
    I have been invested in a (similar?) REIT known as SNH for 11 years now. My original shares currently earn 8.4% I have never directly “re-invested” my dividends with them, but a couple years ago I made a second investment with SNH, these shares earn 7.04%. The average for both lots of SNH shares I own is 7.45%.

    My question is, should I consider diversifying a bit (REIT-wise) and selling some SNH to get into OHI?

    I think the answer is ‘no’ because I would be lowering my dividend percentage, from 7.45% to 6.8 or so.

    What are your thoughts on this?

  76. Norwegian Guy,

    Thanks for following along. Appreciate the readership from Norway! 🙂

    Yeah, currency effects can sway buying decisions a bit when you’re dealing with foreign stocks. I don’t pay much attention, but most of my purchases are domestic. Sounds like you might just have to focus on domestic plays until things turn around. Not a bad position to be in, though.

    Stay in touch!

    Best regards.

  77. Laurence,

    I’ve never really been able to wrap my brain around BDC’s. Difficult to know exactly what they’re investing in and how that’ll translate into ever-growing profit/dividends. MAIN has increased its dividend for the last five consecutive years, but I’ve noticed quite a few BDCs have somewhat spotty dividend records. Not sure if that’s fertile ground for me. As of now, it just goes into the “too hard” pile. And that’s fine. More than enough businesses out there for me that I understand better.

    Cheers!

  78. Dave,

    I don’t follow SNH at all. It has no lengthy dividend growth track record, so it’s not really in my universe. I make only a few exceptions for stocks without lengthy dividend growth track records, but SNH isn’t one of them. Looks like OHI investors have done dramatically better than SNH investors over the last 10 years, so one might want to take a look at why.

    As far as diversification goes, that’s an individual call. But I obviously prefer diversification across quite a few different businesses. The same goes for REITs. I have four now, and I’ll probably own one more before I’m done. Allows me to sleep well at night. But YMMV.

    Good luck!

    Take care.

  79. Already own to much Oil 😛 make sure to take advantage of the strong SEK vs NOK..

    Lykke til med investeringer i Norge 🙂

  80. Jason,

    I just wanted to drop you a note and say thank you for all that you have done in maintaining this wonderful blog. Next week, I’ll be turning 24 and graduating college with a finance/accounting degree (22k in debt).; it’s scary for me….moving out into the real world, constantly comparing myself to friends who already have homes and five figure retirement accounts, but every single day I make sure to drop by your blog to keep my head glued on straight. Your writing keeps me grounded in my own convictions, and your story keeps me calm by reminding me that it’s not about the past; it’s about a simple, financially independent future.

    Keep at it, and thank you again.

    Best,

    Nick
    Salem, MA

  81. I don’t have a lot of REITs in my portfolios, but I’m getting more and more interested into them as many show great results, like OHI. That growth rate is indeed very attractive!

    Congrats on that buy!

    Mike

  82. Nick,

    Very kind of you. Appreciate the support.

    The blog has become kind of a full-time job all by itself. I have a ton of passion for writing, and I hope that I can continue writing/inspiring/motivating/educating/sharing for years to come. Managing a large blog, however, isn’t really much of a passion for me. So I’ll have to come up with a solution for that at some point that allows me to focus more on what I love and less on what I don’t. That’s really what all of this is about – maximize happiness by aligning your actions with your values and spending the most possible time on that which you’re passionate about.

    Best of luck as you begin your own journey over there. Just being cognizant of all of this at 24 years old already puts you in a great spot. Take advantage of that and you’ll do well.

    Cheers!

  83. Mike,

    Yeah, the growth is wonderful. But it’s made even better when it comes attached to that monster yield. I don’t even need much dividend growth with a yield that high, so it’s that much sweeter when you get it anyway. 🙂

    Thanks for dropping by. Hope all is well!

    Cheers.

  84. Jason,

    I am starting to like the idea of branching out into REIT’s as well and I have been researching them a lot lately, trying to learn the basics of valuations and such. Have you looked at GOV? Strong dividend growth is totally lacking, but having arguably THE BEST tenants imaginable (i.e. the govt) makes for a pretty solid business model in and of itself. Not to mention monster yield.

    Guy

  85. Guy,

    I don’t really track GOV. There are too many REITs with solid dividend growth track records (backed, of course, by solid growth and fundamentals) to mess around with one that doesn’t have that kind of history. I looked at it some time ago and couldn’t wrap my brain around some of the numbers (as well as the outside management). Taking a quick look at the stock, it looks like it’s been a fairly poor investment over the last five or so years, relative to many other REITs.

    Best of luck if you invest there!

    Take care.

  86. Jason,

    The market is really ridiculous, almost as nuts as all the driving I’ve gotten in for my work. That is an excellent move taking advantage of a beat down stock with a huge dividend payout. The Healthcare REITs really present interesting opportunities, and I see them having a huge future of growth.

    Nice move again, and congrats on $66 that now works for you every year.

    – Gremlin

  87. Gremlin,

    I’m with you. Definitely some interesting opportunities in this space. Meanwhile, investors are getting paid handsomely. Even if OHI’s dividend growth slows dramatically, the aggregate income story here is pretty compelling. We’ll see how it goes. 🙂

    Thanks for stopping in!

    Cheers.

  88. Iain,

    Nice! That’s some serious capital deployment. It’s amazing what one shot of capital like that can do over the course of your lifetime, but repeating it to a similar (if even much smaller) degree over and over again can have profound and life-changing impacts on you. 🙂

    Enjoy that growing cash flow!

    Best wishes.

  89. DFG,

    That’s a great price you paid over there. If you’re able to load up on OHI in the low $30s, I imagine you’ll do very, very well over the next 10 or 20 years.

    Looking forward to collecting large and growing dividends alongside you for a long time to come. 🙂

    Cheers!

  90. Have you considered buying other healthcare related companies like VTR which is less dependent on reimbursement rates than OHI especially after recent spinoff?

    Greetings from Finland

  91. Good enough 🙂

    Have you considered adding your REIT exposure? Mr. Market seems to be little nervous about rate hikes which I find to be a perfect moment to add more shares of high quality businesses as O, VTR, NNN etc.

  92. Peitsamo,

    Yeah, I mentioned a while back that I’ll probably end up with 10% exposure to REITs. And I mentioned in the article that I have some more room for OHI. So I’ll continue buying up some of these names as capital and room allow. 🙂

    Best regards.

  93. I hear you. Hey, before you get too deep—I think I speak for a lot here. You need to find a quiet corner and think. One post a week, with your personal touch of responding to everyone, is still incredibly unique. Two posts would be a real treat every now and then. The thing is, we all know that you are in the accumulation phase and work elsewhere. We know that you are writing, writing, and writing for your ability to have something to write about (income→stock purchase). We know that you are newly married. We are all still here. I visit many such sites per day where no comments are ever made, welcomed, or responded to. I still visit because of the valuable content. Your journey is important. Your journey is an actual journal that inspires. You are still employed! Self-employment is real. Make it easy and keep it fun. For your blogger friends that comment here…just link to one of their valuable articles in kind. It helps everyone here (that doesn’t follow everyone) and suggests a kindred thing. Just my 2 cents. Been there. I’m not in anyway connected to this industry…but I have found ways to cope in my own (nicely). Great purchase DM! I just picked up shares of OHI today (uh, yesterday). It was definitely upon your recommendation as I could care less to understand how to value REITS. Shame me. Thank all things good that you do! Thank you.

  94. OHI is a great asset. Congratulations on the purchase. OHI is the second largest holding in my direct stock portfolio, and my top 2 holdings are both REITs, so it will likely be awhile before I load up again on OHI. OHI has been my highest total dollar gainer over the past 5 years that I have owned it. Hope it continues to be good for all of us. I bought PG on Friday 9/11/2015 at $67.81.

  95. There you go again Jason! Adding another strong dividend paying company to your portfolio. I can’t wait to see your 3 month and annual summaries here because the list of purchases is getting pretty long.

    Have a great weekend and hopefully the Tigers don’t spoil the Indians late season push for the playoffs!

    Bert

  96. divy,

    Thanks for sharing your thoughts. Really appreciate it! 🙂

    It’s a shame that some authors out there aren’t as engaged. Responding to people and exchanging ideas is one of my favorite aspects about all of this. It’s definitely time consuming – I can spend three or four hours per day at it some days – but it’s also really rewarding. I guess it just depends on how you look at it.

    I’ve definitely sat and thought about this a lot. And there are some wheels in motion now. I definitely want to continue writing as much as I do, not less. So writing less isn’t really my preferred solution. But having some help when it comes to the administration side of things is something I need at this point. I’ve become a bit too consumed by all of this, and I don’t ever want to grow to resent any of it.

    But I’m definitely not going anywhere. Like I said above, I hope to continue writing, sharing, and inspiring for many years to come. If I’m given the chance to, that’s just what I’ll do.

    Thanks again!

    Best regards.

  97. Scott,

    You sound like a very happy shareholder over there. Wish I would have picked up OHI five years ago myself, but I just didn’t feel totally comfortable with the numbers at that point in time. Great REIT, though. They’ve done very well for shareholders. I can’t imagine how anyone could complain about this one. 🙂

    Looking forward to collecting for years to come. Let’s enjoy those big dividends!

    Cheers.

  98. Bert,

    All in the name of chasing down freedom one stock purchase at a time. The more I can buy, the closer I am. 🙂

    Keep up the great work over there as well. You guys are staying very busy, which is just awesome!

    Best wishes.

  99. DM,

    I am also happy to be in by initiating a position with OHI. 10 shares at a discount to add $22 in forward yearly income for minimal capital. I’d like to add more shares in the future also.

  100. DM,

    Thanks for the great analysis of OHI.I have being following your blog for the past few months and it have really inspired me to be frugal and invest for my future. I have noticed that US stocks have dividend champions that increase dividends YOY but i rarely see this in my own country Singapore. Do you think i should still focus on US stocks when i have a hefty 30% withhelding tax for all my dividends?

  101. Really like that buy. Until now I have not been buying yet but I will do in the next months if the price remains that low.

    What do you think of MJN and MON? MJN seems to be one of the few companies from the consumer staples segment which are attractive valued at the moment. I cannot really understand why these two companies got hammered that big in the last time. Their long term story should be ok, I mean babies and agriculture?!

  102. Jason,

    Am I the only one out there waiting for my Dividend Mantra fix? Where have you been? Waiting for my philosophical nugget from the Master. Hope all is well my friend!!

  103. Jason,
    I agree with RTM. I need my DM fix!!!! I was use to your postings every other day. I follow you on Twitter and FB, but it is not the same…. hope you will post soon….

  104. My name is Conrad, and I’m addicted to Dividend Mantra. I have to try to slowly wean myself off your site so that when you skip posting for awhile I don’t become depressed.

  105. Another solid buy Jason! I’m looking forward to the next month playing out so I can build up some capital to start investing again. It’s been a long time since I’ve added capital to my portfolio but the great thing is that I’ve still been getting dividends into my account and even better is that some of the companies I own have even increased the dividends. Win win as far as I’m concerned. OHI is looking good here with a yield over 6.5%.

  106. RTM, MMS, and Conrad,

    Your comments match the avatars you were given. That’s funny. Hey, just go up to the top of the page under his picture and hit the Twitter birdie. Then follow the link to his new twitter account. He’s been busy shopping for some smokin’ quality bargains. He’s okay. Go get your fix!

  107. Any new writing since 09/08/2015?

    You spoil us with 1-2 articles per week, and then you don’t write anything for a while…

  108. I’m having withdrawl symptoms the cold sweats the head aches the yelling at people for no reason. I have even looked at a few voluntary adiction clinics if Jason doesn’t put a new post up soon.

  109. Thanks for the update. I’m old school and off the grid. I will have to patiently wait here for an update. All the best.

  110. I’m guessing he’s holding back and waiting for the Fed news like everyone else. Probably waiting to see what’s happening with the rate increase before laying out for the next purchase.

  111. I’m glad it isn’t just me who is looking for a new post. I was starting to feel weird checking a few times a day. Each time I would hope that everything was ok with DM. Then I would feel strange for being so impatient to read what someone else has to say. Imagine having all these people waiting for you to post something. That’s a lot of pressure!

  112. Well, maybe Jason was being offered a nice new job at a certain conglomerate, where a certain W.B. will resign in the near future?!

    No seriously! I hope everything is up and fine over there. I miss your entries as well!

    Best wishes
    Thorsten

  113. Hi Jason,

    Here Erik, all good?
    I hold already a position on OHI and was thinking on increasing it as well, but I starting analyzing KKR in the last days since seams to be at a good price now (-20% from highs). good dividend yield and fundamentals seams to be good too.

    Have you had a look to it?

    Cheers!

    Erik

  114. Hi Jason -just watching you on You tube. you should look at a you tube blog. Your interview with Kraig was interesting

  115. Jason,

    These recent comments show how utterly popular your blog is. You’re gone for a week, and we all start having withdrawal symptoms. Is there a program to cure this addiction?

    Sincerely,
    ARB–Angry Retail Banker

  116. Jason has been very active this month, but unfortunately not here.

    I hope that I have listed all of his buys and sells this month. The trades are spread over his two Twitter accounts.

    Jason, I miss your master plan. What do you post when and where?

    I hope you will soon be back here. Best regards, TDL

  117. Hope DM’s well. Wouldn’t be surprised if he came back soon to tell us he sold the empire, is emphatically FIREd, and is setting the FF on cruise control while he just plain lives. Peace of mind and money to all here.

  118. Anyhow – problem is that no blog entries for a certain time with no explanation whatsoever will result in more and more people forgetting the site. Not me! But it is a possible result which would be very sad!

  119. I agree Thorsten. It’s particularly strange because we know he still is posting on twitter a couple times a day. He is clearly ignoring the blog for one reason or another, would be interested to hear the reason why.

  120. Hi Jason,

    Really enjoying your blog. If you haven’t already done so, is it possible to write in detail an article about Dividend Taxes so we understand it better? If you’ve already covered this in detail, can you please share a link to the article? Just a suggestion. Thanks and keep up with the inspiring articles!! 🙂

  121. Hi Jason,
    Also in Holland we miss you. Hope all is well and hope to read more of your inspiring articles real soon!

    Cheers,
    Sander

  122. Jason, Mr. Mantra, where are you!! We, your readers, are genuinely concerned for you. Hoping everything is OK. Please return soon and let us know you’re alright.

  123. Hi Jason,
    Hope you are doing OK. It is not typical of you to remain so silent for this long. Please just let us know you are OK.

  124. Keeping my fingers crossed that everything is OK. It’s only when something is gone, that you really realize how important it was. Please write something to let us know that everything is all right.

  125. Based upon tweets from Jason, it looks like he will publish a post soon that explains more on how he plans to blog in the future. He had mentioned before several times that he finds administering the blog (and responding to every comment) to be a chore and one can hardly blame him after keeping this up for so long. Hopefully he’s able to find a good balance so that all are happy.

  126. He is OK, he tweet under jason fieber, he is going to write a new artical soon about the changes that he will be doing here in the blog, he don’t say what are going to be , but soon we all know.

  127. I’ll join the choire. The last time we had this kind of lapse was a few summers ago when you had some doubts about your path to FI. I remember it was a post about your newly acquired scooter.

    Anyway, I hope you are OK.

  128. Do not worry guys! Jason is fine his twitter account is up and running and he is probably just working on something new… (I do not expect anything else from Jason). The buy is a good one Jason, I myself recently visited a masterclass about ETF’s in general and I’m now looking if a Dividend investing ETF could be a nice way to add yield, growth and spread to my current portfolio. Maybe you could do a post about your thinking on this matter? if more people are up for it, it’s a nice way for new investors to start building a portfolio!
    I did a post recently on my recent thoughts and experiences on my blog.

    Last but not least I hope that jason impresses us with the news he is going to bring to the blog as said on his Twitter account he is up to something.

  129. Jason has sold all his dividend stocks and put the money into low cost index funds! IndexMantra.com is coming!!

    I kid, I kid.

    I too hope all is well and our learning can continue.

  130. Prediction: He sold the blog to someone for 500k. Invested in all in cigarettes. Lounging on the beach laughing at all the suckers.

  131. The mighty Mantra’s taking a break. I know we’ll all keep checking back and sending him good vibes — and seriously, let’s all keep checking back here and sending him good vibes — but I think he’d also want us to continue embracing and learning about the path he’s been so generously sharing the last few years. So, I hope this isn’t a etiquette offense, but there’s someone on Seeking Alpha who seems like 10 years from now, retired and collecting dividends Jason… Writer goes by the name Investment Pancake.
    http://seekingalpha.com/author/investment-pancake/instablog

  132. Ha, somehow I doubt that very much. According to his twitter account, he’s alive and well, and planning something new for this blog site to be announced “soon”.

    Now sure, he could have posted and given a time frame for when “soon” was going to be, but then everybody wouldn’t keep coming back here to check in the mean time. Page hits, ya know…..generates more $$ to invest in those dividend stocks!

  133. This is so unlike Jason..There has b=never been this long time period between his articles..3-4 days max…
    hope he is doing fine…

  134. Hi. I have been reading your blog for awhile now and am curious about something that I haven’t seen much on. (or maybe overlooked) I see where you make X amount of money per the dividend but once you “retire” at 40 won’t you have to pay taxes on your income? And if so will it be at the standard employment rate or is it lower or..?
    I’m 20 years old and looking to invest in stocks myself. Hoping to retire at 40 also 🙂 So any information you have would be greatly appreciated.

  135. Where is my weekly Mantra Fix?

    I feel the intense temptation under my skin to buy a 4000 sqft house, together with a shiny Ford Explorer (Chevy Tahoe would be preferred to be honest). A pool in the backyard on credit card would be nice as well. For the family at those hot days.

    Why?

    Because I have to balance out a shitty 9 till 5 job.

    So if someone wants to stop me from these well deserved wishes, I’d argue he/she better show up better sooner than later.

    His name should be J.F., just like in the past.

  136. In the US, current tax laws have a rate of 0% for the tax bracket up to $37,450 for qualified dividends. If they do not change this law, Mantra will not have to pay any taxes up to that level of income.

  137. Hi DM,

    I bought DIS / BDX and CL in the last days and I hope all of them will increase my dividend income a lot in the next years.

    What do you think about the 3 purchases?

    Hopefully my Orders for PG / MMM get touched in the next days 😉 Then I think my Portfolio looks pretty good for my age.

    Kind regards from Germany

  138. Tim,

    Thanks for following along from Germany! 🙂

    Seeing as how I recently purchased DIS and CL (and analyzed DIS here on the blog not long ago), I’d view them as favorable. 🙂

    BDX is one I regret not buying a lot earlier on. It’s a shame. Really fantastic company. Love the business model. When I first started, the yield was too low for me. Now it’s a valuation concern. If there were to be a good-sized pullback there, I’be on it. Maybe I’ll regret that, but I’d like to see it cheaper.

    Keep up the great work over there!

    Cheers.

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