Community Healthcare Trust Incorporated (CHCT): A Top Dividend Challenger in 2025

Community Healthcare Trust Incorporated (CHCT), a healthcare-focused real estate investment trust (REIT), has emerged as a standout dividend player in 2025, offering investors a compelling combination of income potential and strategic growth. With a dividend yield of 11.56%—the highest among its healthcare REIT peers—and a 10-year streak of consecutive annual dividend increases, CHCT is positioning itself as a top contender for income-oriented portfolios. However, its success hinges on navigating industry challenges and maintaining financial resilience.

The Dividend Machine: A Decade of Growth

CHCT’s dividend prowess is undeniable. In Q1 2025, the company raised its quarterly dividend to $0.47 per share, annualizing to $1.88, marking its 39th consecutive quarter of dividend growth since its 2015 IPO. This consistency has fueled a dividend yield far above the healthcare REIT sector average.

The dividend’s sustainability, however, is under scrutiny. Using CHCT’s FY2025 EPS guidance of $0.25, its forward payout ratio—a metric measuring dividends relative to earnings—reaches a staggering 752% (). This raises red flags, as such a high ratio typically signals overreliance on non-earnings sources.

Yet, REITs like CHCT often prioritize Funds from Operations (FFO) over GAAP earnings. CHCT’s Q1 2025 FFO of $12.7 million comfortably covers its dividend obligations, and management emphasizes capital recycling—such as asset sales and revolver draws—to fund growth. This strategy, coupled with a conservative 41% debt-to-capitalization ratio, suggests CHCT is managing risks prudently.

Financial Crossroads: Growth vs. Profitability

CHCT’s Q1 2025 results were mixed. While revenue rose 2.5% year-over-year to $30.08 million, beating estimates, its EPS of $0.03 fell short of the $0.08 forecast. Rising expenses—particularly property operating costs (+$600K) and G&A expenses (+$300K)—pressured margins. The company, however, projects a full-year FY2025 EPS of $0.25, implying recovery in later quarters.

The path to profitability hinges on strategic acquisitions. CHCT has $169.5 million in acquisitions under agreement, targeting returns of 9.1%–9.75%, and plans to close deals in Q3/Q4 2025. These moves aim to boost occupancy (currently 90.9%) and diversify its portfolio, which spans 201 properties across 36 states.

Industry Positioning: Leading in a Struggling Sector

CHCT operates in a challenging environment. The healthcare REIT sector ranks in the bottom 38% of all industries by Zacks’ metrics, with macroeconomic pressures and regulatory shifts clouding outlooks. Yet, CHCT’s dividend yield of 9.87% towers over peers like Healthcare Realty Trust (HR: 7.69%) and Sabra Healthcare REIT (SBRA: 7.14%), making it a top choice for income seekers.

The company’s tenant diversification—no single tenant accounts for more than 9% of annual rent—buffers against sector volatility. However, risks persist, including a geriatric psychiatric hospital tenant that paid only $0.2 million in Q1 while exploring strategic alternatives. Such exposures underscore the need for rigorous tenant screening and capital flexibility.

Risks and Opportunities

• Dividend Sustainability: While FFO supports dividends, the high payout ratio relative to EPS demands close monitoring. Any earnings miss could strain investor confidence.
• Sector Underperformance: The healthcare REIT sector’s low Zacks ranking reflects broader industry headwinds, including declining occupancy and tenant defaults.
• Acquisition Execution: CHCT’s future growth depends on closing its $169.5 million pipeline. Delays or pricing challenges could dampen returns.

Conclusion: A High-Yield Play with Caution

CHCT’s 11.56% dividend yield and decade-long growth streak make it a compelling dividend challenger in 2025. Its conservative balance sheet, FFO-driven payout model, and strategic acquisitions provide a foundation for income generation. However, investors must weigh this against risks like a strained EPS outlook and a struggling sector.

Key data points reinforce this nuanced view:
- Dividend Coverage: FFO of $12.7 million in Q1 comfortably supports the $1.88 annual dividend.
- Growth Pipeline: $169.5 million in acquisitions could lift occupancy and returns.
- Valuation: CHCT’s forward P/FFO is 22% below the sector average, suggesting undervaluation.

While CHCT’s dividend remains a standout feature, investors should monitor FFO trends and tenant performance closely. For those seeking income in a low-yield world, CHCT offers rewards—but requires vigilance.

In a sector facing headwinds, CHCT’s blend of yield, growth, and discipline positions it as a top dividend contender—provided its execution on strategic priorities remains on track.