Updated 3/6/25

CareTrust REIT (NYSE: CTRE) is a real estate investment trust specializing in healthcare-related properties, including skilled nursing facilities and senior housing. As the population continues to age, demand for these types of facilities is expected to remain strong, positioning CTRE within a resilient sector.

For investors seeking reliable income, CTRE’s dividend is one of its main attractions. However, while the company has been a steady payer, dividend investors need to consider not just yield, but also sustainability, financial stability, and potential risks.

Key Dividend Metrics

📌 Dividend Yield: 4.55% (Forward)
📌 Annual Dividend: $1.16 per share
📌 5-Year Average Yield: 5.04%
📌 Payout Ratio: 145% (Earnings-based)
📌 Dividend Growth: Modest over time
📌 Ex-Dividend Date: December 31, 2024
📌 Next Payment Date: January 15, 2025

These numbers highlight an attractive yield, but also raise questions about sustainability due to the high payout ratio. Let’s take a closer look.

Dividend Overview

With a forward yield of 4.55%, CTRE offers a solid income stream, making it an appealing choice for dividend investors. Compared to its historical five-year average yield of 5.04%, today’s yield is slightly lower, indicating the stock has seen some price appreciation in recent years.

At $1.16 per share annually, the dividend provides a steady income source. However, the payout ratio stands at 145%, meaning the company is paying out more than it earns based on net income. While this is not unusual for a REIT—since they distribute most of their income as dividends—investors should ensure that the company’s cash flow remains strong enough to sustain these payouts.

Dividend Growth and Safety

Growth Trends

CareTrust has a track record of paying dividends consistently, though it hasn’t been the most aggressive in increasing them. While some REITs focus on frequent dividend hikes, CTRE has taken a more measured approach.

The high payout ratio is a concern. Ideally, a REIT’s dividend should be well-covered by funds from operations (FFO) rather than net income. If cash flow weakens, maintaining the dividend at current levels could become a challenge.

Dividend Safety

• The 145% payout ratio suggests dividends exceed net earnings, which could be risky if cash flow falters.
• Operating cash flow of $244.25 million is strong, but should be watched closely to ensure it covers payouts.
• Total debt of $396.93 million and a debt-to-equity ratio of 13.55% indicate manageable leverage, but debt levels always matter for REITs.

While the dividend is stable for now, investors should monitor financial performance to ensure long-term sustainability.

Chart Analysis

Overall Trend

The chart for CareTrust REIT (CTRE) shows a clear shift in momentum over the past several months. There was a strong uptrend through most of last year, with the stock climbing steadily above both the 50-day and 200-day moving averages. However, that upward momentum peaked and has since reversed into a prolonged downtrend.

The decline started after reaching a high above $32, and the stock has been making lower highs and lower lows since then. The recent price action confirms that the bearish momentum is still in play, as CTRE is now trading below both its 50-day (orange line) and 200-day (blue line) moving averages.

Moving Averages

One of the most noticeable aspects of this chart is the death cross that occurred when the 50-day moving average crossed below the 200-day moving average. This is generally seen as a bearish signal, indicating that longer-term weakness may persist.

The stock recently attempted to reclaim the 200-day moving average but failed to break through, reinforcing that resistance is still strong at that level. The fact that CTRE is now under both major moving averages suggests that sellers remain in control.

Volume and Market Activity

Volume levels have remained relatively steady, but there was a significant spike during the sharp selloff in December. This could indicate that institutions or large investors were offloading shares at that time. Since then, volume has tapered off, but there are still periodic bursts of selling pressure.

Lighter volume in recent sessions suggests that buyers are not stepping in aggressively at current levels, which is something to watch. A strong reversal typically needs a surge in buying interest, which hasn’t materialized yet.

Relative Strength Index (RSI)

The RSI at the bottom of the chart shows that momentum has weakened but has not yet reached deeply oversold levels. The stock did bounce from a previous low in January when RSI was approaching 30, but the rebound has been weak.

Right now, RSI is hovering in a neutral range, which means CTRE is not extremely oversold or overbought. This suggests there is no immediate pressure for a reversal unless there is a fundamental catalyst. If RSI starts dipping below 30 again, it could indicate that selling is overextended, potentially leading to a bounce.

Recent Price Action

The last five candlesticks show hesitation in the market. There is some buying support near the $25 range, but upside attempts have been met with selling pressure. The wicks on recent candles suggest that rallies are being sold into rather than buyers taking control.

CTRE attempted to push higher in early March but got rejected near the 50-day moving average. The stock then closed at $25.51, which is just above recent lows. The fact that there wasn’t strong follow-through buying after testing resistance levels suggests that further downside is still possible.

Analyst Ratings

CareTrust REIT (CTRE) has seen a mix of analyst upgrades and downgrades in recent months, reflecting differing views on its performance and outlook. Some analysts remain optimistic about its growth potential, while others have expressed concerns about valuation and market conditions.

📈 Upgrades

🔹 October 1, 2024 – Wells Fargo raised CTRE from Equal-Weight to Overweight, increasing the price target from $28 to $34. Analysts cited improving fundamentals in the skilled nursing sector and solid cash flow stability.

🔹 October 7, 2024 – KeyBanc maintained its Overweight rating and adjusted the price target from $27 to $34, pointing to the company’s consistent rental income growth and positive real estate market conditions.

🔹 October 7, 2024 – BMO Capital reiterated an Outperform rating, lifting the price target from $33 to $34 as they saw upside potential in the company’s asset portfolio and tenant stability.

🔹 February 21, 2025 – RBC Capital kept its Outperform rating but lowered the price target from $37 to $32 due to concerns over rising interest rates, which could impact REIT valuations.

📉 Downgrades

🔻 December 9, 2024 – BMO Capital downgraded CTRE from Outperform to Market Perform, trimming the price target from $34 to $32. The change reflected concerns about slower rent escalations and potential regulatory headwinds in the senior housing sector.

🔻 January 2, 2025 – Wedbush moved its rating from Neutral to Underperform, cutting the price target from $34 to $26. Analysts highlighted valuation risks and a potential decline in funds from operations (FFO) growth as key reasons for the downgrade.

🎯 Consensus Price Target

The average 12-month price target for CTRE is approximately $30.83, based on evaluations from multiple analysts. Price targets range from $26 on the low end to $34 on the high end, indicating a potential upside of around 16.52% from the current price of $25.51. The varying estimates suggest a balanced mix of optimism and caution regarding CTRE’s financial trajectory.

Earning Report Summary

CareTrust REIT recently shared its latest earnings results, giving investors a clearer picture of how the company is performing. Overall, revenue growth was solid, but there were a few areas that raised some questions.

Revenue and Net Income

The company pulled in $86.94 million in revenue for the fourth quarter, which was a big jump—about 45.55% higher than the same time last year. That’s a strong sign that business is growing. Net income also saw a nice boost, coming in at $52.14 million, which was up 55.9% from the previous quarter.

Funds from Operations (FFO)

For a REIT like CareTrust, funds from operations (FFO) is one of the most important numbers to watch. This quarter, FFO landed at $72.9 million, or 40 cents per share. Since FFO focuses on cash generated from real estate operations rather than accounting adjustments like depreciation, it’s a great measure of how well the company’s properties are performing.

Earnings Per Share (EPS)

On the earnings per share (EPS) front, the company reported $0.29 per share. That was a bit of a letdown compared to the $0.41 per share that analysts were expecting. While revenue growth was impressive, this suggests there were some extra costs or lower margins that ate into profitability.

Yearly Performance

For the entire year, CareTrust REIT brought in $125.1 million in earnings, which was a massive 132.8% increase from the year before. That kind of jump suggests the company is doing a good job managing its properties and growing its portfolio.

Recent Moves and Investments

CareTrust has been active in expanding its footprint, picking up new properties that fit its long-term strategy. The company is clearly focused on adding more healthcare real estate to its portfolio, which makes sense given the rising demand for senior living and skilled nursing facilities.

Dividend Update

Investors looking for income got some good news—CareTrust declared a quarterly dividend of $0.29 per share. This keeps the payout ratio at around 78% of its funds available for distribution (FAD), which means the company is maintaining a balance between rewarding shareholders and keeping enough cash on hand for growth.

Looking Ahead

Management sounded optimistic about the future, pointing to a strong pipeline of investment opportunities. They seem confident about growth, especially in sectors tied to aging demographics. At the same time, they acknowledged the challenges ahead, particularly around interest rates and operational costs. It’s clear the company is positioning itself for long-term success while keeping an eye on the broader economic picture.

Financial Health and Stability

CareTrust operates with solid margins, a key indicator of financial strength:

• Profit Margin: 42.22%
• Operating Margin: 62.08%
• Return on Assets (ROA): 4.35%
• Return on Equity (ROE): 5.72%

These numbers show strong operational efficiency, but lower returns compared to other sectors due to the capital-intensive nature of real estate.

Cash reserves of $213.82 million provide some cushion, while debt remains moderate. A debt-to-equity ratio of 13.55% is reasonable for a REIT, suggesting that leverage is under control. However, any increase in borrowing costs due to rising interest rates could impact profitability.

Valuation and Stock Performance

With a price-to-earnings (P/E) ratio of 31.89, CTRE appears slightly expensive compared to some of its peers. However, REITs are often valued based on their price-to-funds-from-operations (P/FFO) rather than traditional earnings metrics.

Other valuation indicators include:

• Price/Sales: 17.34, which is higher than many REITs
• Price/Book: 1.65, which is reasonable for a real estate company
• Enterprise Value/EBITDA: 23.50, indicating a relatively high valuation

The stock has traded between $23.10 and $33.15 over the past year and is currently at $25.51. The 50-day moving average is $26.47, while the 200-day moving average is $27.96, signaling some recent weakness in price momentum.

Risks and Considerations

1. Dividend Coverage – With a payout ratio over 100%, dividends are dependent on cash flow rather than earnings, which could become an issue in tougher times.
2. Interest Rate Sensitivity – Rising interest rates can impact borrowing costs and REIT valuations, making rate hikes a key risk.
3. Tenant Concentration – A significant portion of CTRE’s rental income comes from skilled nursing operators, a sector facing regulatory and financial challenges.
4. Stock Volatility – A beta of 1.14 suggests the stock experiences moderate volatility, which may not suit all dividend investors.
5. Economic Conditions – Factors such as inflation, labor costs in healthcare, and policy changes could affect future profitability.

Final Thoughts

CareTrust REIT offers a compelling dividend yield within the healthcare real estate space. With a 4.55% yield and a business model benefiting from demographic trends, it remains a strong income play.

However, the high payout ratio and reliance on cash flow to sustain dividends require close monitoring. While the company’s financial health is stable, future dividend safety depends on consistent earnings, tenant stability, and effective debt management.

For investors looking at CTRE as an income-producing asset, keeping an eye on financial performance and macroeconomic trends will be essential to ensure long-term dividend stability.