Market Overview

Wells Fargo: Omega Healthcare Fairly Valued At Current Levels, Further Dividend Raises 'Unlikely' In 2018

Share:
Wells Fargo: Omega Healthcare Fairly Valued At Current Levels, Further Dividend Raises 'Unlikely' In 2018

Following its meeting with management of Omega Healthcare Investors Inc (NYSE: OHI), Wells Fargo came away with its optimism tempered.

The Analyst

Todd Stender downgraded Omega Healthcare from Outperform to Market Perform and maintained his $22 price target.

The Thesis

Omega Healthcare's fundamentals, including its rent coverage ratios and census, are favorable, as overall portfolio quality benefits from "operator swap-outs and asset sales," Stender said in a note. The analyst believes these positives are already discounted by shares, which he said are "fairly valued" at current levels.

Stender maintained his price target, derived on the assumption interest rates will be slowly raised over the "hold" period.

The analyst said the management indicated at the REITWeek three weeks ago that quarterly earnings over the near-to-intermediate term will be impacted by the dilutive impact of asset sales, as rents taper off and the proceeds are redeployed.

This, Stender said, is likely to create some headline volatility in shares, given the likelihood that dividend coverage is weakened, as the AFFO payout ratio remains at or above 100 percent.

The company suggested following its last dividend raise in January that further raises are unlikely for the remainder of the year.

"We believe the dividend to be covered, though do not believe the total return prospects justify our strongest rating now that the shares have reached our valuation target of $32/shr," the note read.

Price Action

Omega Healthcare shares have gained about 22 percent in the year-to-date period, trading around $31.26 at time of publication.

Related Links:

JPMorgan Enters The REIT ETF Space

Stifel: Geopolitical Uncertainty, Interest In Hard Assets Are Positives For REITs

Latest Ratings for OHI

DateFirmActionFromTo
Sep 2019Initiates Coverage OnBuy
Sep 2019MaintainsStrong Buy
Aug 2019MaintainsMarket Perform

View More Analyst Ratings for OHI
View the Latest Analyst Ratings

Posted-In: Todd Stender Wells Fargo SecuritiesAnalyst Color REIT Downgrades Analyst Ratings Real Estate Best of Benzinga

 

Related Articles (OHI)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
MLHRSidoti & Co.Maintains45.0
ICFISidoti & Co.Maintains99.0
CASYSidoti & Co.Maintains174.0
ATUSGuggenheimMaintains33.0
CHTRGuggenheimMaintains488.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

Investors Might Be Worried by Trade Issues With Europe, China

This Bond ETF Could Regain Its Angelic Status