JMP Expects a ‘Value-Creating Year’ for These 2 High-Yield Dividend Stocks

Every investor is in the markets to find a return, and there are as many investing strategies as there are investors. Some prefer to play defense, looking for stocks that will offer slow and steady returns no matter what happens, while others prefer a more aggressive stance, finding higher-risk stocks that generate larger returns in the short run. And some investors prefer a balanced strategy, combining both low- and high-risk shares.

Dividend stocks form a key part of any stock strategy, as either a hedge against risk, a defense against a market downturn, or an income generator in a combination strategy. Dividend payments, especially reliable high-yield payments, provide a steady income stream, making them a valuable asset.

Covering some solid dividend stocks for JMP, analyst Aaron Hecht sees a reason to bet on higher value in the coming year. He notes that multiple tailwinds are coming together, and will likely lead to outsized returns – and he’s picked out two high-yield dividend stocks that he sees as particularly likely to reap gains in that environment. Let’s take a closer look.

Sabra Healthcare REIT (SBRA)

First up is a real estate investment trust, or REIT, with a focus on the medical and health care industry. This company, Sabra Health Care, operates through the ownership and management of numerous medical-based properties, while its tenants operate the medical care facilities housed at the premises. Sabra was founded in 2010 and is based in Southern California.

The company’s last quarterly report covered 3Q24, and at the end of that quarter, Sabra’s property portfolio contained 373 real estate properties. Of these, 233 properties are skilled nursing or transitional care facilities. Other properties in the company’s portfolio include senior housing communities, behavioral health facilities, and specialty hospitals. These medical properties boast a total of 37,793 beds or units. Geographically, Sabra’s holdings are spread across the continental US and extend into Canada.

The company’s 3Q24 report also showed that it generated a total of $178 million in revenues for the quarter, a figure that was up 10% year-over-year and beat the forecast by $2.76 million. Getting to the bottom line, the company reported normalized funds from operations (FFO) – a key metric for REITs – of 35 cents per share, in line with expectations. Looking ahead, the company has published its 2024 full-year guidance for normalized FFO of $1.39 to $1.40, at the midpoint just above the consensus view of $1.39.

We’re here to talk about dividends, however, and Sabra’s is worth looking at. The company has been paying out dividends since 2011, and it has held the payment steady at 30 cents per common share since 2020. The last declaration was made on October 31 and paid out on November 29; the 30-cent dividend annualizes to $1.20 per common share and gives a forward yield of almost 7%.

JMP analyst Hecht is impressed by this company, noting that it has recovered from the COVID-19 pandemic disruptions and that it is poised to gain in an economic environment that favors the healthcare industry. As he writes of the stock, “We believe SBRA will have a unique and value-creating year in 2025 for multiple reasons. First, tenant operating troubles related to the pandemic are functionally over. Second, skilled nursing rent coverage ratios (already nearing 2x) should continue to expand given the reporting methodology and a strong Medicaid rate environment. Third, senior housing assets are poised for multi-year, outsized NOI growth due to a significant shortfall of development, in our view. This combination of factors should result in SBRA’s stock being positively re-valued which, we believe, creates a unique entry point for investors.”

Unsurprisingly, Hecht rates this stock as Outperform (i.e. Buy), and his price target of $20 points toward a one-year gain of 16.5%. Add in the dividend yield, and this stock has the potential to return as much as 24% in the next 12 months. (To watch Hecht’s track record, click here)

Overall, shares in SBRA have earned a Moderate Buy consensus rating from the Street’s experts, based on 8 reviews that include 5 to Buy and 3 to Hold. The shares are priced at $17.18, and their average price target of $19.64 suggests a one-year upside potential of 14%. (See SBRA stock forecast)

LTC Properties (LTC)

The next stock we’ll look at, LTC Properties, is another REIT, but one with a twist. Where Sabra, above, is the owner-manager of its properties, LTC acts primarily as an owner-investor in the real estate sector. The company focuses on the health care and senior living segments and acts as a self-administered REIT. LTC’s investments include a wide range of activities, including mortgage loans and financing, triple-net lease transactions, and joint ventures. In addition, the company provides financing and structured finance solutions for construction projects, including preferred equity, bridge, mezzanine, and unitranche lending.

LTC’s portfolio of 196 properties is mainly split between senior assisted living facilities and skilled nursing properties. Of these, 114 are in senior living, and 76 are in skilled nursing; the last 6 are listed as ‘other.’ The company’s properties are located in US markets, in 25 of the lower 48 states.

On the financial side, in 3Q24, the company’s quarterly funds from operations came to 78 cents per share, 9 cents better than had been expected, and up 7 cents per share from the prior year period.

LTC pays out its common share dividend on a monthly basis, rather than quarterly. This is a less common approach that holds some advantages for investors, mainly that the income comes in every month, allowing it to be more easily used to cover regular recurring expenses. The company declares the payments quarterly, and earlier this month declared the 1Q25 monthly dividends.

The dividends were set at 19 cents per common share and are scheduled for payment on January 31, February 28, and March 31. The payment annualizes to $2.28 per common share and provides a forward yield of 6.8%.

JMP’s Hecht lays out the key points behind his positive thesis on this stock. He says of LTC, “We believe LTC is positioned to have a unique value-creating year in 2025 for three primary reasons. First, management is enhancing the company’s long-term organic growth rate by establishing a SHOP/RIDEA portfolio. Second, operators are fully recovered from the pandemic, which eliminates uncertainty around cash flow. Third, leverage has declined to one of the lowest points on LTC’s record. We believe these factors occurring in tandem will ultimately lead LTC’s stock to be positively re-valued.”

Bottom line, Hecht puts an Outperform (i.e. Buy) rating on these shares, while his $40 price target implies a one-year upside potential of 17%.

This is the bullish view. LTC’s overall consensus rating, however, is a Hold, based on 5 reviews that include 3 Holds, and 1 Buy and Sell, each. The shares are priced at $34.24, and their $36.75 average price target suggests an upside of 7% on the one-year horizon. (See LTC stock forecast)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.