Sabra Health Care REIT: Steady Earnings But Not Yet Fully Mature

Sabra Health Care REIT, an American real estate company, generates 81% of its net operating income from two main segments: skilled nursing (51%) and senior housing (30%). The company has reported steady earnings, but is not yet considered fully mature.

Sabra Health Care REIT (NASDAQ: SBRA), an American real estate company specializing in leasing healthcare properties, has reported steady earnings, but analysts and investors are divided on its maturity status. The company generates 81% of its net operating income (NOI) from two major segments: skilled nursing (51%) and senior housing (30%). The skilled nursing segment, in particular, has shown strong growth, with occupancy reaching 81.7% by December 2024, up from 77.5% in December 2023 [1].

The company operates under triple-net contracts, where tenants pay almost all costs, and it boasts diversification among its tenants, with no single tenant accounting for more than 10% of its NOI. Its largest tenants include The Ensign Group, Signature Healthcare, and Avamere Family of Companies, with 19% of the revenue directly managed by its own management [1].

Despite the steady earnings, SBRA is not yet considered fully mature. The company's strategy is not focused on aggressive market share gains but rather on long-term operating profitability. While it has shown moderate debt leverage and unmet demand in senior healthcare services, its growth profile is seen as slow, with a PEG ratio of 2.43x, compared to the industry average [1].

In terms of financial performance, SBRA's AFFO (Adjusted Funds from Operations) has shown a steady, albeit slow, increase, going from $81 million in 1Q2024 to $88 million in 1Q2025. Its P/AFFO grew from $0.35 to $0.37, and its FWD P/AFFO is 12.75x versus the industry average of 14.94x. The company estimates a normalized AFFO of $1.47-$1.50 for 2025, but it would only surpass the normalized AFFO of $1.47 reached in 2022 this year [1].

SBRA's dividend profile is not bad, with an annual payout of $1.20 and a yield of 6.40%, compared to the industry median of 4.76%. However, its 82.18% payout ratio leaves little room for growth, and its competitors have better performance and growth prospects [1].

In conclusion, while Sabra Health Care REIT has shown steady earnings, it is not yet considered fully mature. The company's strategy is focused on long-term profitability rather than aggressive market share gains, and its growth profile is seen as slow. However, its financial performance is stable, and its dividend profile is not bad. Investors should keep an eye on the company's strategy and growth prospects to determine its full maturity status.

References:
[1] https://seekingalpha.com/article/4801593-sabra-health-steady-earnings-but-not-yet-fully-mature