Sienna Senior Living Inc. (TSX:SIA) is one of Canada’s largest owners and operators of senior housing facilities.
The company’s portfolio consists of 35 long-term care homes and 19 retirement residences, located in Ontario and British Columbia. The company has nearly 8,000 beds and approximately 8,800 employees.
There’s a lot to like about the senior’s housing sector. There are significant barriers to entry, especially in the long-term care part of the industry. An operator cannot qualify for government funding without strict approval.
In addition, investors should like the demographic boom the sector will experience when baby boomers start getting older. Sienna projects the number of Canadians over 75 will double between now and 2030.
Long-term care occupancy continues to flirt with 99%, while the retirement residences part of the portfolio saw occupancy increase to 94.5% in 2016. Management projects both parts of its business will continue to be strong in 2017.
The company posted $1.40 per share in adjusted funds from operations in 2016, a 9% increase versus 2015. Earnings should go up in 2017 as a few acquisitions made in 2016 will add to the bottom line. Look for the company to make more deals as it helps consolidate Canada’s fragmented retirement residences industry.
The company paid $0.90 per share in dividends in 2016, which translates into a 5.2% yield today. The payout ratio for 2016 was just 64.3% of adjusted funds from operations. Investors don’t have to worry about the dividend getting cut.
