As a value oriented, high-yield, contrarian investor, my strategy is simple: buy the best names in whatever industry Wall Street hates most.
In other words, something is always on sale, so that’s where I’ll deploy my capital.
Right now, REITs are one of the most undervalued sectors. Skilled nursing facility, or SNF REITs in particular, have languished over the years, due to market uncertainty surrounding potential changes in government healthcare spending and now the risks surrounding the GOP’s attempts to repeal ObamaCare.
Which is why, when I heard that Sabra Healthcare (NASDAQ:SBRA) was buying one of my SNF REITs, Care Capital Properties (NYSE:CCP), I was excited to see what the combination of these two high-yielding REITs would mean for the future of their combined dividend growth potential.
After a careful examination of the deal, I concluded that while the new Sabra will indeed be a solid high-yield dividend growth choice, it still can’t beat the industry’s best name, Omega Healthcare Investors (NYSE:OHI).
So let’s take a closer look at this SNF merger to see what investors in both Sabra and Care Capital Properties need to know, but also why Omega Healthcare is still likely to offer the industry’s best total returns in the coming years.
Sabra + CCP Merger Is A Very Good Idea…
On May 8th, Sabra Healthcare announced it was buying Care Capital Properties in a $7.4 billion all-stock deal.
CCP shareholders will receive 1.123 shares of Sabra, however, when the deal closes in Q3 2017, will end up owning 59% of the new REIT, which will retain the Sabra Healthcare name and ticker.
Of course, what matters to long-term dividend investors is what the deal will mean for future dividend safety and growth potential.
Fortunately, from those perspectives, the deal is a big win for shareholders of both REITs. That’s because the new Sabra Healthcare will now be the nation’s second-largest SNF REIT, with 564 properties across 43 states and Canada, and leased out to 70…