If you collect a 10% dividend, that can be a great way to boost your gains from a stock. Even in a down year on the markets, it can put you in a position where you earn a positive return. But such a high yield often comes with risks, and dividend payments are never a guarantee.

Sabra Health Care REIT (SBRA 0.13%) offers a yield of 10% right now. Is it too good to be true, or could this be an underrated dividend stock to add to your portfolio?

What the company's latest numbers show

Sabra Health is a real estate investment trust (REIT) with a portfolio of more than 400 properties, including senior housing, behavioral health, skilled nursing, and other facilities. Healthcare can be a relatively safe place for a REIT to invest in, certainly more so than retail or residential housing where challenging economic conditions may have a greater impact on those tenants.

Last year, Sabra generated $624.8 million in revenue (versus $569.5 million in 2021) but it still incurred a net loss of $77.6 million -- largely due to impairment charges of more than $94 million. Impairment, however, is a non-cash expense. REITs prefer to use funds from operations (FFO) as a way of measuring performance and their ability to pay dividends since it excludes non-cash items.

Is the dividend sustainable when looking at FFO?

In 2022, Sabra's FFO totaled $295.9 million, which was 17% higher than the $253.2 million it reported a year earlier. On a per-share basis, that comes out to $1.28, versus the $1.15 it reported in 2021. That's also slightly higher than the 1.20 the REIT pays out in dividends per share.

However, for the last three months of 2022, the FFO per share was only $0.25. That's less than the $0.30 it pays out in dividends. This suggests that the REIT's dividend may not be sustainable. Sabra cut its dividend in 2020 due to the outbreak of COVID-19 but even now as the economy has for the most part returned to normal, the payout still doesn't appear to be all that safe.

The REIT maintains that it remains in a "difficult environment primarily due to labor issues," which suggests to me that costs may continue to creep up and chip away at its profitability. However, management believes its portfolio is stable and that by 2024 it will get back to growing its earnings.

Investors are better off avoiding the stock for now

Sabra's business doesn't look to be in great shape right now, and another dividend cut may be inevitable. Over the past 10 years, the REIT has lost more than half of its value as profitability has gone in the wrong direction. And so while Sabra's 10% dividend yield may look appealing, it may only end up offsetting your losses from the stock itself. Given the rising costs of labor, profits may not get a whole lot better for Sabra anytime soon.

For investors, the safest route would be to steer clear of the stock as Sabra's business still has a lot of work to do before becoming a more tenable investment option. And there are much better dividend stocks to own right now.