Updated 3/6/25
Community Healthcare Trust Incorporated (NYSE: CHCT) is a healthcare-focused real estate investment trust (REIT) that owns and manages properties in non-urban markets across the U.S. With a market cap of around $528 million, it plays an important role in providing medical facilities outside of major metropolitan areas.
For dividend investors, CHCT stands out with an exceptionally high yield of over 10%, which is more than double its five-year average. While that may seem like a dream for income-focused portfolios, a closer look at the numbers is necessary to determine if this dividend is truly reliable or if it’s signaling trouble ahead.
Key Dividend Metrics
📈 Dividend Yield: 10.04% (Forward)
💰 Annual Dividend Per Share: $1.87
📆 Ex-Dividend Date: February 24, 2025
📊 Payout Ratio: 288.1% (A Concern)
📅 Dividend Growth Rate (5-Year Avg.): Slowing
💵 Cash Flow Strength: Levered Free Cash Flow of $73.8M
Dividend Overview
CHCT has built a reputation as a steady dividend payer, which isn’t surprising given its structure as a REIT. By law, REITs must distribute at least 90% of their taxable income to shareholders, making them a natural fit for dividend-seeking investors.
A 10% dividend yield is hard to ignore, but when a yield climbs that high, it often signals one of two things—either the stock is deeply undervalued, or investors are skeptical about the company’s ability to maintain its payout.
The biggest concern is the payout ratio, which currently sits at 288.1%. That means CHCT is paying out far more in dividends than it’s earning, which is not sustainable in the long run. While REITs typically use adjusted funds from operations (AFFO) rather than net income to measure dividend coverage, a payout ratio this high raises questions about whether a cut is on the horizon.
Dividend Growth and Safety
CHCT has managed to grow its dividend over time, but that trend may not continue if financial pressure mounts. The numbers reveal some troubling signs.
- The company’s earnings per share (EPS) is negative, currently at -$0.23. This means that CHCT is technically losing money, which is a red flag for dividend safety.
- Operating cash flow remains solid at $58.88 million, but with a net loss of $5.98 million, the company may not be able to sustain its current payout level indefinitely.
- CHCT’s debt-to-equity ratio is 102.94%, meaning it has significant leverage. While debt is normal for a REIT, a high-interest rate environment makes refinancing more expensive, potentially impacting future dividend payments.
Is the Dividend Safe?
Right now, the dividend is still being paid, but the high payout ratio and negative earnings suggest it may not be fully secure. If cash flow weakens or borrowing becomes more expensive, CHCT could be forced to reduce its dividend.
Chart Analysis
Price Trend and Moving Averages
The stock has been in a prolonged downtrend, with a significant drop occurring in the middle of last year. Since then, the price has struggled to regain momentum, trading below both the 50-day moving average (orange line) and 200-day moving average (blue line) for most of the timeframe shown.
Recently, there was an attempt to break above the 50-day moving average, but the stock lost steam and is now hovering just below it. The 200-day moving average remains firmly above the price, reinforcing the broader downtrend. This setup suggests the stock is still facing resistance and has not yet confirmed a trend reversal.
Volume and Market Activity
Volume has remained relatively low for most of the period, apart from a major spike around October. This spike could indicate a large-scale sell-off, possibly due to earnings, news, or a broader market event. Since then, volume has not returned to those levels, suggesting that big-money investors may still be on the sidelines.
A few smaller volume spikes are visible, particularly when the stock made attempts to push higher. However, without sustained follow-through, these moves did not lead to a sustained breakout.
Relative Strength Index (RSI) and Momentum
The RSI indicator, shown at the bottom, has spent a lot of time in lower territory, confirming the stock’s overall weakness. It did attempt to climb back to neutral levels earlier this year but has since dipped again.
An RSI near oversold conditions suggests the stock has been under pressure, but it’s not necessarily a buy signal. Stocks can remain oversold for extended periods in a strong downtrend. Until RSI moves convincingly higher and holds above the midpoint, momentum remains weak.
Recent Price Action
Looking at the last few candles, the stock has been trading in a relatively tight range, with a mix of small-bodied candles. This suggests some indecision in the market. The most recent candle shows a slight gain but closed near the middle of its range, meaning there wasn’t strong conviction in either direction.
The 50-day moving average appears to be acting as short-term resistance. If the price fails to hold above it in the coming sessions, further downside could be on the table.
Analyst Ratings
📈 Upgrades
In recent months, analysts have shown a mixed outlook on Community Healthcare Trust Incorporated (CHCT). One notable upgrade came in December 2024, when Truist Financial raised its price target from $22.00 to $23.00 while maintaining a buy rating. This suggests increased confidence in the company’s ability to generate stable cash flow and maintain its dividend. The upgrade was largely driven by expectations that healthcare real estate demand would remain steady, particularly in non-urban areas where CHCT operates.
📉 Downgrades
On the other side, Evercore ISI made a change in September 2024, moving its rating from underperform to inline but lowering its price target from $21.00 to $18.00. This signals that while analysts no longer expect the stock to significantly underperform, they also don’t see much room for upside. The downgrade was likely influenced by concerns over CHCT’s high payout ratio and the impact of rising interest rates on its ability to refinance debt.
🎯 Consensus Price Target
The current analyst consensus reflects a hold rating for CHCT, with an average 12-month price target of $21.25. This suggests a potential 14.16% upside from the recent closing price of $18.62. Analyst targets vary, with the lowest estimate at $18.00 and the highest at $25.00, indicating a range of opinions on how well CHCT can navigate its current financial challenges.
The combination of upgrades and downgrades highlights the uncertainty surrounding CHCT. While some analysts see potential for recovery, others remain cautious about its ability to sustain dividends and manage its debt in the current environment.
Earnings Report Summary
Community Healthcare Trust Incorporated (CHCT) just released its latest earnings, giving investors a closer look at how the company performed in the last quarter of 2024. The numbers show a mix of steady operations, ongoing acquisitions, and some strategic financial adjustments that could impact the company’s future.
Financial Performance
CHCT reported net income of $1.8 million for the quarter, which translates to about $0.04 per share. For a real estate investment trust (REIT), a more important measure is funds from operations (FFO), which came in at $0.48 per share. This is a better indicator of cash flow, which is key for maintaining dividends. Adjusted FFO, which accounts for recurring expenses and one-time costs, was slightly higher at $0.55 per share.
Revenue and Expenses
Revenue for the quarter came in at $29.3 million, down slightly from the previous quarter. On the expense side, property operating costs decreased to $5.5 million, which helped soften the impact of lower revenue.
Acquisitions and Property Sales
CHCT continues to expand its portfolio. The company acquired three new properties, totaling 38,000 square feet, for a combined price of $8.2 million. These properties were fully leased at the time of purchase, ensuring an immediate stream of rental income.
At the same time, CHCT made some strategic sales, including one property in Texas and a land parcel in Georgia, bringing in $1.4 million. Looking forward, the company has several acquisitions lined up, including a $9.5 million residential treatment campus. In addition, it has agreements to buy seven more properties over the next few years for a total of $169.5 million, with expected returns between 9 and 9.75 percent.
Debt and Financing
To support these expansion efforts, CHCT made a significant move by increasing its credit facility to $400 million in October. The company also extended the repayment deadline to 2029, which gives it more financial flexibility. It even managed to lower its borrowing costs slightly, which should help manage interest expenses over time.
Dividend Update
For investors focused on income, CHCT declared a quarterly dividend of $0.4675 per share, payable on March 5, 2025. This signals the company’s continued commitment to returning cash to shareholders, though investors will be watching closely to see if this payout remains sustainable in the long term.
Overall, CHCT remains active in growing its property holdings while keeping an eye on its financial position. The company has some challenges ahead, but its latest earnings suggest it is staying focused on managing debt and maintaining steady cash flow.
Financial Health and Stability
A REIT’s financial stability is crucial when evaluating its ability to maintain dividends over the long term.
- CHCT currently has $22 million in cash on hand, which provides some flexibility, but it’s not a massive cushion.
- The company carries $489.98 million in total debt, which is manageable, but the cost of servicing this debt could become a challenge if interest rates remain high.
- Revenue is growing at just 0.6% year-over-year, which is slow for a company that needs consistent cash flow to support its dividend payments.
- Profitability is a concern, with a -2.75% profit margin and a return on equity of -0.64%. This means the company is struggling to turn its assets into profits.
While CHCT is not in immediate danger, its balance sheet doesn’t leave much room for error. Any further financial strain could put pressure on its dividend payments.
Valuation and Stock Performance
From a valuation standpoint, CHCT is trading at a price-to-book (P/B) ratio of 1.11, which suggests that it is relatively cheap compared to its historical levels. However, its forward price-to-earnings (P/E) ratio of 50.25 indicates that earnings expectations remain weak.
Looking at stock performance:
- CHCT’s 52-week range is $15.06 to $27.62, with the current price at $18.71.
- The stock is down 31% over the past year, significantly underperforming the broader market.
- It’s currently trading below both its 50-day and 200-day moving averages, which suggests that investor sentiment remains weak.
The combination of a declining stock price and a high yield raises concerns that investors are pricing in potential risks, including a possible dividend cut.
Risks and Considerations
📉 Dividend Cut Risk – With a payout ratio well above 200% and earnings in the red, CHCT may be forced to trim its dividend in the near future.
🏥 Healthcare Sector Dependence – CHCT relies on tenants in the healthcare industry. While demand for medical facilities remains strong, economic downturns or industry-specific disruptions could impact rental income.
📊 Debt Burden – Interest rates have risen significantly, and CHCT’s ability to refinance its debt at favorable terms will be a key factor in determining future financial stability.
🔍 Stock Underperformance – CHCT has lagged behind the market, which may indicate broader investor concerns about its financial health and dividend sustainability.
Final Thoughts
CHCT offers a sky-high dividend yield, which is sure to attract income investors. However, a closer look at the numbers shows that this yield comes with significant risks. The company is paying out more in dividends than it’s earning, and its negative profitability combined with rising debt costs could lead to a future dividend cut.
For investors willing to take on some risk, CHCT may still be worth watching, but it’s important to keep an eye on earnings reports and management’s approach to handling its debt and cash flow. If the company can improve profitability and maintain steady cash flow, the dividend may survive, but if financial pressures continue, a reduction in payouts may be inevitable.
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