As an investor, whether you seek appreciation, income or both, when considering stocks to purchase, it pays to look at a company’s five-year performance record. A five-year time frame should address the company’s growth, dividend growth, recent news and earnings.
Take a look at how much a $10,000 investment in 2018 would be generating in dividends today for this real estate investment trust (REIT) with a solid five-year performance.
Founded in 2013, CareTrust REIT Inc. CTRE is a San Clemente, California-based healthcare REIT that owns and leases senior housing, skilled nursing facilities and assisted living facilities. At the end of the third quarter of 2022, its long-term net-lease portfolio consisted of 198 properties across 21 states. Senior nursing facilities account for 78% of its portfolio, 11% are assisted living facilities, and the remaining 12% are campuses.
On Jan. 4, CareTrust REIT announced it had sold five senior housing facilities, containing 240 units in Virginia for $13 million. CEO Dave Sedgwick said the sales were part of a plan to “de-risk the portfolio.” Another step toward risk reduction occurred in mid-December when CareTrust REIT renewed its unsecured revolving credit facility and extended the maturity date of its credit to February 2027.
CareTrust REIT has a $1.82 billion capitalization rate. Its 52-week range is $15.90 to $23.15. At a recent closing price of $18.79, it was up 18% from its low in early May.
If you invested $10,000 in Caretrust REIT five years ago, you would have purchased 637.34 shares at an approximate cost of $15.69 per share. At the time, the quarterly dividend was $0.205, for an annual payout of $$0.82 yielding 5.2%.
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Over the past five years, CareTrust REIT has performed well. It has a total return of 52.17%, for an average annual total return of 8.76%. This includes $3.10 of share price appreciation and $5.09 of collected dividends per share. Your $10,000 initial investment would now be worth $15,577.
CareTrust REIT has raised its quarterly dividend four times since 2018 and now pays out $0.275, or $1.10 per share annually, an increase of 34.1%. The dividend presently yields 5.8%.
Some investors prefer to reinvest dividends rather than collect the income in their brokerage accounts. If you invested $10,000 in CareTrust REIT five years ago and reinvested your dividends, your original 637.34 shares would have grown to 828.86 shares, with a total return of 55.74%, or a 9.27% annual average. Your initial investment of $10,000 would now be worth $15,577.75.
CareTrust REIT’s forward funds from operations (FFO) is $1.48, so the FFO payout ratio is 74% — just below the threshold for increased risk to its dividend. The FFO in the third quarter declined a penny from the third quarter of 2021. But revenue rose from $48.61 million in the third quarter of 2021 to $50.29 million in the third quarter of 2022.
CareTrust REIT has performed well for investors over the past five years, and with management’s recent efforts to reduce risk, the REIT could continue to provide solid returns for investors throughout the next five years.
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