A 7.2% High-Yielding Dividend Stock That Is About to Break Out

NorthWest Health Prop Real Est Inv Trust (TSX:NWH.UN) could rally significantly in the next year, as numerous development projects are completed, and the company’s big investments begin to pay off.

Karen Thomas, MSc, CFA

Karen is a stock market enthusiast focused on uncovering those stocks that she believes the market has mispriced. She does this through fundamental and quantitative analysis of companies and their industries, as well as a study of future opportunities and trends. She holds a Masters degree in Finance, the CFA designation, and has over 20 years of experience in the investment management industry. Having worked at a major pension fund, as well as two leading mutual fund firms as an analyst and portfolio manager, she has solid investing expertise which she aims to share with her readers.

Published March 13, 2018 10:49 am EDT

In the news, we hear a lot about Bitcoin and how blockchain technology will change the world.

Yet we continue to watch as Bitcoin trades in an erratic and nerve-racking fashion, having risen to levels above $20,000 in 2017 and down to just over $10,000 currently. To sum it up, we have watched a roller-coaster ride that seems to have no rhyme or reason. Yet here we are, talking about it again, trying to make some sense of it all.

Something I don’t hear a lot of talk about anymore is the demographic shift that is in progress, as more of the population enters their golden years. This means a big chunk of the population is in or entering retirement (i.e., lower spending years) and that the demands to the healthcare industry are steadily rising.

This is a global phenomenon, with many countries experiencing the same demographic shift.

NorthWest Health Prop Real Est Inv Trust (TSX:NWH.UN) is increasingly positioning itself to benefit from this shift, as more people need the healthcare system.

Here are the key reasons investors should own this stock:

Meaningful growth in 2017

Last year was a year of transformation for NorthWest, with a 40% increase in its asset base to $5 billion, $330 million in equity financing, $872 million in acquisitions, $103 million in development, and $200 million in dispositions.

All this is accompanied by a 6% increase in adjusted cash flow and a 2.9% increase in net asset value (NAV).

High-yield, attractive payout ratio

Currently yielding a very attractive 7.2%, NorthWest has a high-quality, diversified portfolio of healthcare real estate properties located throughout Canada, Brazil, Germany, Australia, and New Zealand, offering investors exposure to this growing market.

The payout ratio stands at 86%, signaling the company’s ability to handle this dividend payment.

Low-risk, steady growth

With more than half of net operating income coming from healthcare infrastructure properties, mostly hospitals, the company’s portfolio consists mostly of long-term inflation indexed leases.

The current company-wide occupancy is 96%, and the average lease term is 13 years.

The company’s hospital portfolio is especially attractive, with inflation-indexed rent, lease contracts of more than 20 years, and limited capital requirements on the part of the REIT.

Meaningful growth expected in the next 12 months

With interests in more than 13 development projects, and a focus on deleveraging the balance sheet, NorthWest is looking at significant value creation over the next few years.

Over the next 12 months, we will see the completion of numerous significant development projects, which will drive meaningful NAV growth.

The current NAV is $12. The stock trades below this at $11.09.