Here's Why Omega Healthcare Investors Inc. Slipped Today

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What happened

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Shares of Omega Healthcare Investors Inc. (NYSE: OHI), a real estate investment trust (REIT) focused on long-term care facilities, fell as much as 10% after the company reported third-quarter earnings this morning. A troubled operator of the company's facilities led to an unsettling writedown. After the market digested the news, though, the stock's losses narrowed to 7.9% as of 1:13 p.m. EDT.

So what

When Omega Healthcare Investors reported three months ago, management warned that two of the 77 operators it collects rent from were having a tough time paying their bills. During the third quarter, Orianna Health Systems slipped more than 90 days into arrears, prompting the company to record $194.7 million in non-cash impairment charges.

Today's sell-off probably would have been more severe, but adjusting for non-cash charges the REIT generated funds from operations of $0.79 per share, about 4.8% less than during the same period last year. Investors were also encouraged by the company raising its dividend payout for the 21st consecutive quarter, to $0.65 per share.

Now what

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At recent prices, Omega shares offer a tempting 9.1% forward yield; that will rise to 9.3% if the REIT continues to raise its payout by $0.01 during each of the next three quarters. Before you load your portfolio with Omega shares to get at that yield, though, it's important to remember that big payouts come with big risks.

At about 82% of adjusted FFO during the latest quarter, the current payout is reaching a point where further increases won't be sustainable if several more of Omega's operators go the same way as Orianna Health Systems. Although this is one healthcare stock I'd prefer to hold forever, I'll be watching it like a hawk in the quarters ahead.

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Cory Renauer owns shares of Omega Healthcare Investors. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.