If there is one immutable trend in the U.S., it’s the aging of the baby boomers and the implications for healthcare.
One company who has been working to position itself for this immutable trend is healthcare real estate investment trust (REIT) Omega Healthcare Investors Inc (NYSE:OHI).
The baby boomer generation — those born between 1946 and 1964 — turned 60 years old. So, many baby boomers are quickly approaching their retirement years — years in which they’ll likely need increased medical care.
That’s more than 75 million people, or nearly one-third of the U.S. population.
While this baby boomer demographic shifts from peak wage-earners to retired and semi-retired citizens over the next two decades, it will have profound effects on a number of sectors of our economy, none more so than healthcare.
According to the American Hospital Association, the over-65 population will triple between 1980 and 2030, with the first baby boomers turning 65 in 2011. Although the health and lifestyle of people at age 65 is very different than it was in generations past, chronic conditions continue to plague the population.
The AHA predicts that more than 37 million boomers will be managing more than one chronic condition by 2030, with one out of four, or 14 million, living with diabetes. Almost half will be living with arthritis and more than one-third, or over 21 million, will be classified as obese and living with all the health risks associated with obesity.
And that’s just chronic issues that will affect mobility. You also have heart disease, cancer, Alzheimer’s and a host of other health conditions that will require increasing amounts of long-term care.
What’s more, given the fact that the U.S. is a highly mobile workforce, particularly in today’s economy, few parents live in the same city — or region — as their children. That means, taking care of aging parents increasingly falls to professional healthcare workers.
Omega Healthcare’s current portfolio of investments includes 560 operating healthcare facilities located in 37 states and operated by 50 third-party healthcare operating companies.
What many of us knew as ‘nursing homes’ are now labeled ‘skilled nursing facilities’ (SNFs), where there is a staff available on premesis to help residents with every aspect of their daily lives.
While there are certainly new sectors that provide in-home services to the elderly, at some point many people will require more support than they’re able to receive at home or through their family networks.
And the fact is, this is a matter of numbers. The more elderly people there are, the more of them that are going to require SNFs.
OHI benefits from high margins in its model since the properties generate a great deal of income given the special niche the provide. And Omega Healthcare’s continuing to expand, taking advantage of low interest rates to retire old higher interest debt and buy new properties and complementary REITs.
For example, in the past month OHI retired $200 million in bonds due in 2020 at 7.5% interest and launched a $700 million bond offering at 4.5% due in 2027. That’s a smart move for a company looking to grow while money is cheap even though it may hurt margins in the short term.
The trend OHI is building on isn’t a flash in the pan; Omega Healthcare is locked in for decades to come. There’s plenty of growth to come for OHI and while it rolls in, it’s nice to get an inflation-trouncing 5.5% dividend for our patience.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.