If you are an investor that is seeking a steady and reliable income builder to add to your portfolio, consider looking into REITs as a viable option.
What is a REIT?
REITs, or Real Estate Investment Trusts, are the equity equivalent of owning a diversified portfolio of real estate holdings, and act as an excellent hedge against market volatility and downside risk. We mentioned that REITs provide a high dividend return to unitholders and that has to do with the regulatory conditions REITs operate under.
By law, REITs have to pay out at least 90% of their net income in the form of dividends, which are typically paid out quarterly or monthly. In all, there are hundreds of different REITs that span nearly every imaginable industry from cell towers to malls to apartment buildings to data centers. There is a REIT for every possible form of real estate.
Sabra Health Care REIT
Sabra Health Care REIT (NASDAQ:SBRA) is a healthcare REIT that operates over 425 different healthcare facilities across the United States and Canada. Sabra actually has a total of 609 investments which includes a joint venture that has them oversee 158 senior facilities which are owned by operators instead of leased.
Sabra’s current stock performance
The REIT has a market cap of $3.77 billion USD at the time of this writing, and boasts an enterprise value of $6.5 billion USD. Sabra REIT is presently trading near its 52-week high price at $17.88 per unit, and has a 52-week trading range of $10.65 to $18.95, but hit rock bottom in March of 2020 at $5.11 per unit. Trend-wise, Sabra is trading right at its 50-day moving average and higher than its 200-day moving average signalling an upward trend as it heads into its Q2 earnings call on May 5th.
Outlook for Sabra Health Care REIT
The healthcare industry presents several bullish factors that help to present the case for Sabra’s potential long-term strength. First, most hospitals and senior facilities have residents that are subsidized by government healthcare plans which are about as stable as it gets for consistent income. Secondly, senior facilities were hammered by the COVID-19 pandemic, but with the ongoing mass vaccination efforts, positive cases have plummeted by 99% according to Welltower (NYSE:WELL), one of the largest senior facility REITs in America. Finally, the Aging Boomer era is coming, with early estimates of 3 million Americans turning 65 every year until 2029, and by 2030, 20% of the total population is expected to be 65 or older.
Sabra also has excellent fundamentals with an FFO of 182.9% over the past five years and one of the highest FFO rates in 2020 during the COVID-19 pandemic amongst healthcare REITs. FFO or Funds From Operations, is a method in which REITs calculate their cash flow from operations. Sabra is anticipating to continue to increase its dividend yield which is currently at 6.6%, one of the highest in the healthcare REIT industry. With a weighted average of eight years remaining on aggregate lease terms, and an impressive 20.5% NOI CAGR or compound annual growth rate, since 2011, Sabra makes for an intriguing investment on the future of the American healthcare system. With a strong dividend yield and a balanced asset mix, Sabra is a solid REIT to add for steady income flow to a diversified portfolio.