Investors Can Tackle Inflation With Reliable, 8.5%-Yielding Sabra Health Care Stock
July 14, 2022
Why SBRA Stock Is Up 11.5% in 2022 & Still Bullish
Sabra Health Care REIT Inc (NASDAQ:SBRA) is a great niche real estate investment trust (REIT) with a portfolio of high-quality health-care properties. The company reports solid financial results, is expanding its North American real estate portfolio, and rewards buy-and-hold investors with safe and reliable ultra-high-yield dividends.
When it comes to areas of stable business growth, you can’t go wrong with the aging North American population.
In the U.S., by 2040, roughly 20% of the population will be 65 or older, up from 12.5% in 2000. Between 2020 and 2040, the number of Americans aged 65 and older will more than double to 80 million. The number of American adults aged 85 and older, the group that needs the most help with personal care, is expected to quadruple by 2040. (Source: “The US Population Is Aging,” Urban Institute, last accessed July 13, 2022.)
In Canada, from 2017 to 2037, the portion of the population that’s 65 and older is expected to grow by 68%. The number of Canadians who are 75 and older is expected to double in that period. By 2050, the 85-and-older population of Canada could top more than 2.7 million. (Sources: “Infographic: Canada’s Seniors Population Outlook: Uncharted Territory,” Canadian Institute for Health Information, last accessed July 12, 2022 and “A Portrait of Canada’s Growing Population Aged 85 and Older From the 2021 Census,” Statistics Canada, April 27, 2022.)
That’s where Sabra Health Care REIT Inc comes in. The company is a self-administered, self-managed REIT that acquires, finances, and owns properties that it leases to third-party tenants in the health-care sector. (Source: “Investor Presentation,” Sabra Health Care REIT Inc, May 4, 2022.)
The company’s portfolio is primarily made up of skilled nursing/transitional care facilities, senior housing communities, specialty hospitals, and other health-care-related facilities. Sabra Health Care REIT Inc’s portfolio includes 416 investments: 279 skilled nursing/transitional care facilities, 59 leased senior housing communities, 50 managed senior housing communities, 13 behavioral health facilities, and 15 specialty hospital and “other” properties. (Source: “Sabra Reports First Quarter 2022 Results; Provides Business Update,” Sabra Health Care REIT Inc, May 4, 2022.)
The “other” properties include six facilities that have been converted—or are in the process of being converted—into addiction treatment centers. In December 2020, the REIT opened a Recovery Centers of America inpatient detox and substance use disorder treatment facility in Monroeville, PA. On December 16, 2021, it closed on its purchase of a 132-bed hotel in Greenville, SC that’s being converted into a Recovery Centers of American addiction treatment facility. (Source: Sabra Health Care REIT Inc, May 4, 2022, op. cit.)
Sabra Health Care REIT Inc’s real estate properties include 41,445 beds/units spread across the U.S. and Canada.
As of May 4, the REIT also had 16 investments in loans receivable, seven preferred equity investments, one asset held for sale, one investment in a sales-type lease, and one investment in an unconsolidated joint venture.
Another Solid Quarter of EPS Growth
For the third quarter ended March 31, Sabra Health Care REIT Inc announced that its total revenue increased by seven percent year-over-year to $163.1 million. The revenue per occupied room at the company’s assisted living facilities climbed by nearly six percent. The revenue per occupied room at its independent living properties went up by more than one percent year-over-year. (Source: Ibid.)
The company reported first-quarter 2022 net income of 40.6 million, or $0.18 per share, up by 21% over its first-quarter 2021 net income of $33.4 million, or $0.16 per share.
Sabra Health Care REIT Inc’s funds from operations (FFO), which measures cash generated by a REIT, was flat year-over-year at $0.39 per share in the first quarter of 2022. Its adjusted FFO (AFFO) was also flat at $0.39 per share. Its normalized AFFO, which is where the company’s dividends come from, was $0.38 per share in the first quarter of 2022, down from $0.40 in the same prior-year period.
The company has collected 99.5% of its forecasted rents since the beginning of the COVID-19 pandemic through April 2022.
During the first quarter of 2022, Sabra Health Care REIT Inc acquired a managed senior housing community for $26.0 million, with an initial cash yield of 6.7%. In May, the company closed on the purchase of a senior housing portfolio in Canada with joint venture partner Sienna Senior Living Inc (TSE:SIA, OTCMKTS:LWSCF) for $236.5 million.
Sabra Health Care ended the first quarter with approximately $1.0 billion of liquidity and $475.0 million available under its at-the-market (ATM) program.
Sabra Health Care REIT Inc Declares Quarterly Dividend of $0.30/Share
In May, Sabra Health Care’s board declared a quarterly cash dividend of $0.30 per share, for a yield of 8.5%. The dividend amount represents 79% of the REIT’s first-quarter normalized AFFO per share.
Sabra Health Care stock’s ultra-high-yield dividend can certainly help investors combat today’s 40-year high inflation rate of 8.6%. And by all accounts, the high inflation is going to stick around for at least the rest of 2022.
Moreover, thanks to Sabra Health Care REIT Inc’s ongoing improvements to its managed senior housing portfolio and acquisitions, SBRA stock has been on a tear, currently up by 13.5% over the last three months and up by 11.5% year-to-date.
In comparison, the S&P 500 is down by 12% over the last three months and 19% year-to-date. Furthermore, the S&P 500’s dividend yield is just 1.7%.
Chart courtesy of StockCharts.com
The Lowdown on Sabra Health Care Stock
Sabra Health Care REIT Inc is a great way for investors to take advantage of North America’s aging population and fast-growing health-care real estate industry. The company has a solid balance sheet, it continues to report robust earnings, and it has been expanding its property portfolio.
While the health-care facility sector has faced headwinds during the COVID-19 pandemic, Sabra Health Care has collected virtually all of its rents during the period. This has helped the company maintain SBRA stock’s ultra-high-yield dividend.
