STORE provided guidance for next year, and management expects AFFO to rise 3% to 5% in 2021, mostly due to acquisitions. That means that its 4.2% dividend yield should be comfortably sustainable. As the economy reopens and consumers return to stores, STORE’s dividends should become even more secure.
Sabra Health Care
Sabra Health Care (NASDAQ: SBRA) is a REIT that owns more than 400 healthcare facilities primarily engaged in skilled nursing and eldercare. These are located all over the U.S. Such hospitals and care facilities aren’t immune to recessions, but they do offer some resistance. Regardless of economic conditions, some people require rehabilitative and nursing care from medical professionals. As the number of senior citizens in the U.S. rises, demand for the services rendered by Sabra’s tenants will also increase. Many of these patients are also covered by federal and state healthcare plans, which provide a reliable source of cash flows partially passed along to Sabra.
COVID-19 did result in lower occupancy rates, which negatively impacted earnings. However, total revenue only declined 2.5% year over year in the most recent quarter, which is a strong sign of recovery from earlier disruptions. The company’s AFFO of $1.74 per share make the $1.20 annual dividend and 6.5% yield both look rather secure. The company has prioritized building liquidity on the balance sheet, and guidance calls for roughly $0.40 in FFO for the first quarter of 2021. Those are both great signs for income investors looking to capitalize on recovery from the global pandemic.