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This dividend REIT gained 17% in a month outperforming the market

This dividend REIT gained 17% in a month outperforming the market
Dino Kurbegovic

Real estate investment trusts (REITs) refer to a diverse group of financial vehicles that invest in real estate and span a broad range of market niches. Usually, the most popular ones deal with real estate in the retail or industry sector; however, healthcare REITs are gaining popularity.

One such REIT is Sabra Health Care (NASDAQ: SBRA), a small-cap healthcare REIT focused on the skilled nursing and senior housing segment. For May, SBRA managed to outperform the market by gaining 17%.

Meanwhile, the company has been paying a strong and steady quarterly dividend since 2011, which yielded slightly above 9% on average in the past five years; while the price of the stock currently hovers around $13; it could be said it’s inexpensive. 


Read also: The five top REITs to invest in 2022 


Stock performance and analysis  

Conversely, shares are flat year-to-date (YTD) but have had a nice run in May, rising 17%, to now trade between the 50-day and 200-day Simple Moving Averages (SMAs). Higher trading volumes were noted at the beginning of the month when the stock surge began; however, in more recent sessions, that has abated. 

SBRA  20-50-200 SMA lines chart. Source. Finviz.com data. See more stocks here.

Consequently, analysts give the shares a moderate buy rating, predicting that the average price for the next 12 months may reach a price of $15.31, which is 10.7% higher than the current trading price of $13.83.

SBRA  analysts’ price target. Source: TipRanks

Too good to be true?

In essence, the downside of the high yield is that SBRA is not paying the dividend entirely out of its earnings, but rather out of its capital, which can negatively affect the growth of the stock. On May 25, the stock received an upgrade from Mizuho Securities analyst Vikram Malhotra, who summarized the positive sides in a note to clients.

“We see occupancy slowly but steadily improving, with a low bar amongst the investor community. Occupancy at Sabra’s top seven tenants was 76.5% as of March 2022, up from 74.6% in January and 75.7% in mid-2021.”

Furthermore, the company posted solid earnings, with funds from operations (FFO) coming in line at $0.38 and revenue beating estimates by $2.92 million to reach a total revenue for the quarter of $163.11 million. 

In summary, SBRA could be a solid stock for investors with above-average risk appetites who are willing to stay in the stock for the high yield. 

If the occupancy rate keeps rising and the company can sustain the dividend on earnings alone, Sabra could be a hidden gem; yet, caution is urged since high-yielding stocks tend to be volatile from time to time. 

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk. 

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