Omega Healthcare Investors Inc. (NYSE:OHI)

You may have never heard of Kathleen Casey-Kirschling, but last fall she made history.

You see, Kathy filed to receive her social security retirement benefits on Monday, October 15, 2007.

What’s so important about that you ask?

Well, Kathy was born on January 1, 1946. That makes her the first official baby-boomer to file for social security benefits.  Behind her is a line of 80 million more just like her ready to collect their share of the government promised pie.

But this is more than just a conga-line of soon-to-be senior citizens looking to get paid. No, this event will have a paradigm-shifting effect on the nation as well as your stock portfolio.

That’s why every portfolio should include some investments in healthcare. Demographic trends, after all, are destiny.

That where Omega Healthcare Investors Inc. comes in.

The company is a real estate investment trust investing in and providing financing to the long-term care industry. The Timonium-MD based REIT owns or holds mortgages on 235 healthcare facilities with approximately 27,209 beds located in 28 states.  Their inventory is operated by 26 third-party healthcare companies.

This portfolio is made up of:

• 222 long-term healthcare facilities and 2 rehabilitation hospitals owned and leased to third parties.
• Fixed rate mortgages in 9 long-term healthcare facilities.
• 3 long term care facilities held for sale. 

They currently pay a 6.5% quarterly dividend yield that increased last quarter. That marked the 14th quarterly dividend increase in the last 18 quarters, with the common dividend doubling from $0.15 in the third quarter of 2003 to $0.30 per share today.

Amazingly, they achieve these results with only 19 employees, including the five executive officers.

Moreover they recently increased their 2008 adjusted FFO guidance to a range of $1.49 to $1.55 per diluted share, up from $1.41 to $1.43 per diluted share.

So how good has OHI been to its investors over the last eight years?  In short, the answer is fantastic. A $1,000 investment in the company back then would have yielded $3,826.34 today if the dividends had been reinvested. That’s 282% return.

Omega, however, isn’t without a certain level of risk—especially in the current credit environment. Nonetheless, it does provide a certain level of growth for the lazy investor portfolio.

Alternatively, a safer play on the same theme would be consumer products giant Johnson & Johnson (NYSE:JNJ). And while JNJ currently does not have a terribly high dividend yield (only about 2.5%), it has been consistently increasing its annual dividend payouts for decades.

In fact, Johnson & Johnson has paid out $1.66 worth of dividends in the last 12 months. On that basis, a buy-and-hold investor who simply bought the stock in April of 1985 and held it for 23 years would now be getting a 100% annual return on his or her original investment solely from the annual dividend payout!

Not bad. Either way, dividend investments within the healthcare industry promise to be strong. Those 80 million aging boomers will break down eventually. I’m one of them.

Buy Omega Healthcare Investors Inc. (OHI) at or near $17.94.

Cheers,

Jack Aubrey
Senior Equity Analyst, Residual Income Report