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With interest rates still historically low, many investors are turning to high-yield real estate investment trusts as a reliable source of income. Yet a REIT’s dividend yield is only as reliable as its underlying business.
Sabra Health Care REIT Stock: One high-yield REIT that may be attractive to investors at current levels is Sabra Health Care REIT Inc (NASDAQ: SBRA). Sabra invests in health care real estate, including skilled nursing facilities, senior housing communities and specialty hospitals.
Related Link: 3 REITs To Buy With 10% Dividends
REITs are required by law to distribute 90% of taxable income to shareholders, and Sabra has a sizable 6.7% yield. In addition, shares are relatively undervalued based on the company’s funds from operations. FFO is simply the term REITs use to describe cash flow from operations.
Sabra Health Care REIT's Numbers: Sabra shares currently trade at a price-to-FFO ratio of around 10.5x, a significant discount to the average P/FFO average of the senior housing REIT group as a whole.
Sabra’s FFO peaked back in 2018, but it remains up 182.9% overall in the past five years.
Value investors likely love the REIT’s yield and attractive valuation, while skeptics likely point out that revenue, net income and FFO growth were all negative in 2019 prior to the pandemic.
After peaking at $22.08 in late 2019 prior to the emergence of the coronavirus, Sabra shares have now recovered nicely from a bottom of $5.11 in March 2020.
Sabra Health Care REIT's Outlook: Looking ahead, analysts are expecting Sabra shares to take a breather over the next 12 months. The average price target among the 14 analysts covering the stock is $18, suggesting just 1.4% upside.
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