It's been just over three years since my Special Situations portfolio purchased Sabra Healthcare REIT (NASDAQ:SBRA). In late 2010, it had just been freshly spun off from Sun Healthcare, and was looking to grow. Well, how did it perform?
Quite well. The position is up 62%, not including dividends. If we add $3.64 per share in dividends over that period, then the total gain comes to 84%. Annualized, that averages out to 21%. I'm pleased by the gain overall, but I've decided to sell.
I think Sabra will continue to do well over the next years. The company will continue to acquire health care real estate and grow its dividend. So why am I selling?
Two things. First, I expect that growth to slow. With much less balance sheet flexibility than it had when it first came public, Sabra will not grow as briskly as it had been up until now. That won't be a problem for long-term holders, especially dividend investors who want a solid and growing payout.
Second, with that decline in growth, I don't expect Sabra's stock to outperform as it has in the past, and I have other great ideas that can earn 20% or more annually over the next few years.
With limited capital and other great ideas, the decision to sell is simply a capital allocation move.