I added a new position to my portfolio with the purchase of Owens & Minor Inc. (OMI)
54 shares @ $21.95 on 1/26/2018.
This increases my forward 12-month dividend income by $60.32 to a total of $4,786.32
I also updated my portfolio page to reflect the change.
My Thoughts
I think Ownes & Minor presents a great buying opportunity in this overheated market. The company has been increasing dividends for 20 connectivities years. They currently have a dividend yield of a whopping 6.41%. They not only have a high dividend yield, but it is a safe dividend. Ownes & Minor currently has a dividend payout ratio of 81.55%. Yes, it is a high dividend payout ratio, but CFRA has a 3-year project earning growth of 4%.
CFRA also predicts revenue growth to 7% this year which includes the recent acquisition. These acquisitions will help the company not only increase revenues but also expands the company reaches beyond hospitals.
OMI has a 5-year dividend growth rate of 3.2% and the most recent dividend increase was only 0.98%. The dividend growth rate, or lack of dividend growth, is not the main reason why I bought into this company. My top reasons are that the company currently undervalued, the company has a great dividend growth history, and that the company has a high initial dividend yield that is safe.
OMI is undervalued, and I recommend it a BUY at this time. I have a fair price of $20.98 which means that OMI is 30.5% undervalued based on today’s price of $16.08 (2-19-2018).
Source: fastgraphs.com
What do you think of OMI? Plan on buying? or why not?
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I’d say good pickup but you need to have a slightly contrarian view with OMI. Starting with the contract losses over the last couple of years (about 7.25% of sales), lengthening sales cycle and the Amazon effect all are playing a role in beating down this puppy. Then there are the health systems migrating to a self-distributed model. They do have a good logistics operation though. Been riding this one down thinking if they can’t right the ship they might be a M&A candidate.
Hi Charlie,
Thanks for the comment and reading the post. OMI two acquisition in the works. This will help increase revenue and earnings. In the meantime, I am getting rewarded with a high yield safe dividend.
Thanks see you soon. 🙂