Let us evaluate against this background Sienna Senior Living (TSX:SIA), which pays a monthly dividend of over 4%, by examining its recent quarterly performance, growth prospects and valuation.
Sienna’s performance in the third quarter
Sienna Senior Living offers a comprehensive range of senior living options, including independent living, assisted living, memory care, long-term care and specialized programs and services. The company operates 44 retirement homes, 46 long-term care communities and 12 managed homes.
In November, the company reported solid third-quarter results, marked by broad improvements in key operating metrics. Revenues increased 16.4% year-over-year to $261.7 million, driven by occupancy gains, rent increases, higher contributions from care and support services, higher direct care funding, growth in private lodging revenues and incremental contributions from acquisitions completed in the last four quarters. It is striking that the average occupancy of the same property increased by 230 basis points to 94.1%.
Adjusted net operating income (NOI) for owned properties increased 9.7% to $46.5 million, reflecting strong revenue momentum, although higher labor and utility costs partially offset these gains. Adjusted funds from operations (AFFO) increased 36.1% to $27.7 million, while the AFFO payout ratio improved to 78.7% from 91.3% in the prior year quarter, increasing the sustainability of future dividend payments.
However, the debt to adjusted gross book value ratio increased by 190 basis points to 44.2%, mainly due to the issuance of senior unsecured bonds and new mortgages related to acquisitions during the year. In addition, the weighted average cost of capital increased by 20 basis points to 3.9% at the end of the third quarter.
Despite higher debt and financing costs, the company ended the quarter with solid liquidity of $464 million, leaving it well-positioned to support its continued growth initiatives. With this operational momentum in place, we now turn to examine the growth prospects.
Sienna’s growth prospects
Building on the positive momentum, Sienna reported that same-property occupancy improved to 94.7% in October, with management expecting it to reach 95% by the end of 2025. Supported by increasing occupancy and rental growth, the company is targeting margin expansion of 220 basis points by 2025. Management has also emphasized continued investments in marketing and sales initiatives, operational efficiencies and asset optimization to further strengthen performance. Supported by these efforts, the company expects owner-occupied NOI to increase by 13 to 14% by 2025.
On the demographic front, Statistics Canada predicts that Canada’s population aged 85 and older will double between 2021 and 2036, creating strong demand tailwinds in the longer term. At the same time, the limited new supply of retirement housing could expand Sienna’s addressable market. To benefit from this favorable dynamic, the company is growing both organically and through strategic acquisitions. Last year alone, it completed $218 million in development projects and acquired $594.7 million in assets, bringing its total investment to $812.7 million. Backed by favorable demographics and disciplined expansion, these initiatives position Sienna for sustainable long-term financial growth.
Investor takeaway
In addition to consistent monthly dividends, Sienna has delivered meaningful capital growth to its shareholders. Over the last twelve months, the stock is up 47.3% while continuing to pay a monthly dividend of $0.078 per share, yielding a 4.1% yield over time.
Following the recent rally, the company’s forward price-to-sales ratio has risen to around 2, reflecting improved investor sentiment. But given its strong quarterly performance, solid balance sheet, improving payout ratio and favorable long-term growth prospects, I think Sienna remains an attractive investment at current levels.
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