Home Health care provider Why Sabra Health Care REIT shares jumped 20% in May

Why Sabra Health Care REIT shares jumped 20% in May


What happened

Shares of Sabra Healthcare REIT (NASDAQ: SBRA) jumped 20.2% in May, according to data provided by S&P Global Market Intelligence. The health-focused real estate investment trust (REITs) reported its first quarter results and completed a large-scale acquisition last month.

So what

Sabra Health Care REIT reported strong first quarter results in May. The Healthcare REITs continued to collect rent despite the lingering effects of the pandemic. In total, it has collected 99.5% of its projected rents since the start of the pandemic. The company also reported that occupancy trends at its skilled nursing properties remain healthy despite some initial headwinds related to the omicron variant of the coronavirus.

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The REIT also reported improvements in its managed senior housing portfolio. Revenue per occupied room (RevPOR) improved by nearly 6% over the past year for serviced residences. Meanwhile, RevPOR at independent residences was up more than 1% year over year.

Sabra has also taken steps to expand its portfolio. It purchased a managed senior housing community from its development pipeline for $26 million in the first quarter. In May, the company completed the purchase of a portfolio of high-quality seniors housing in Canada with a joint venture partner Housing for the elderly in Siena. The partners have paid a total of $236.5 million for 11 senior housing communities that Sienna will operate.

In other news last month, Sabra Health Care REIT received an upgrade from Mizuho analyst Vikram Malhotra. He raised his rating from neutral to buy while setting a price target of $15. Malhotra believes that the occupancy rate should continue to improve. He also performed a sensitivity analysis which shows that Sabra can continue to cover its 8.6% dividend.

However, not all analysts are so optimistic. Capital one analyst Daniel Bernstein reinstated coverage on the stock in early June. He set his quote at equal weight while lowering his price target from $18 per share to $15.50. Bernstein lowered his view as he remains cautious about the pace of recovery in the skilled nursing sector.

Now what

While Sabra Health Care REIT continues to face pandemic-related headwinds, conditions in the senior housing sector are improving. For this reason, the REIT should be able to maintain its large dividend. That makes it an attractive option for investors willing to take on a bit more risk for the higher yield and upside potential of the senior housing sector’s recovery from the headwinds it has faced during the pandemic.

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Matthew DiLallo has no position in the stocks mentioned. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.