While the demographics are strongly in its favor, the nursing home business isn't always the easiest, even in a non-COVID-19 world. Regulations seem to change daily, many of the homes are at the mercy of Medicare for reimbursement and qualified labor is hard to find. So despite 10,000 baby boomers turning 65 every day, investing in a nursing home is not a slam dunk. I do like, however, the business of being a landlord to assisted living facilities like nursing homes. If a nursing home intends to keep its doors open, it must pay its rent, plain and simple. Omega Healthcare Investors (NYSE: OHI) owns the real estate for 957 assisted living facilities in 40 states plus one facility in the U.K. It is a real estate investment trust (REIT). As a result, its funds from operations (FFO) is a more important metric to look at rather than earnings or cash flow. The company's FFO hasn't been particularly impressive over the past few years, though it is rebounding strongly from dips in 2017 and 2018. Last year, Omega generated $640 million in FFO and paid shareholders $564 million in dividends for a payout ratio of 88%. |
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