3 Top Dividend Stocks in Assisted Living

By Keith Speights Markets Fool.com

Assisted living properties should soon be in high demand, especially beginning in 2026 when baby boomers start to reach the age where they're more likely to require assistance with daily living activities. Investors have several dividend stocks in assisted living to choose from that should be poised for solid growth in the next decade.

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Omega Healthcare Investors (NYSE: OHI), Sabra Health Care REIT (NASDAQ: SBRA), and National Health Investors (NYSE: NHI) stand out as particularly strong investing choices. Here's why these three rank as the top dividend stocks in assisted living.

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Omega Healthcare Investors

While Omega Healthcare Investors' primary focus is on skilled nursing facilities, the company also owns 101 assisted living facilities. Omega reported revenue of $900.8 million last year, of which over 82% stemmed from rental income.

Omega Healthcare Investors' dividend currently yields 7.98%. As a real estate investment trust (REIT), the company distributes at least 90% of its earnings to shareholders in the form of dividends. Omega posted strong funds from operations in 2016 of $660.1 million, up 45% from the prior year.

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Wall Street analysts project that Omega Healthcare Investors will increase earnings by an average annual rate of nearly 16% over the next five years. This strong growth potential combined with an outstanding dividend yield puts the REIT in the upper echelon of assisted living dividend stocks.

Sabra Health Care REIT

Like Omega Healthcare Investors, Sabra Health Care REIT currently focuses mainly on skilled nursing. However, the company's growth strategy is to add more assisted living properties as well asindependent living and memory care facilities. Sabra recently entered into a merger agreement with Care Capital Properties (NYSE: CCP), which also specializes in skilled nursing. Sabra posted revenue of $260.5 million last year.

Sabra's dividend yield stands at 7.27%. Last year, the REIT reported funds from operations totaling $164.4 million, which allowed Sabra to easily fund its strong dividend. It's possible that the CCP merger could put a strain on the company's dividend given CCP's debt load of nearly $1.5 billion. However, I think it's likely that Sabra will be able to continue to claim a yield that will be attractive to investors.

Analysts think that Sabra will grow earnings by an average annual rate of 6%. That estimate, however, doesn't reflect the merger with CCP.

National Health Investors

National Health Investors (NHI) owns206 healthcare real estate properties across32 states, of which 133 are senior housing properties such as assisted living facilities, senior living campuses, independent living facilities, and entrance-fee communities. The company reported revenue of $248.5 million in 2016.

NHI's dividend currently yields 5.05%. Like Omega Healthcare Investors and Sabra, NHI is a REIT. It posted funds from operations (FFO) of $205.6 million last year. NHI's dividend payout represented roughly 67% of FFO -- a relatively healthy level that should give investors comfort that the dividend is in good shape.

Wall Street analysts expect NHI to increase its earnings by 10% annually on average over the next five years. Some of this growth will be achieved through acquisitions of new properties. NHI has been steadily buying new senior housing and skilled nursing properties.

Best of the bunch

I think that Omega Healthcare Investors easily ranks as the best overall dividend stock in assisted living. Its dividend yield is topped only by CCP, which will soon merge with Sabra if everything goes as planned. More importantly, Omega claims strong financial results that should only improve in the coming years.

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Keith Speights has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.