TFSA Investors: $63,500 in This REIT Pays $4,286 in Tax-Free Income Each Year!

If you’re looking for steady tax-free income in your TFSA, Northwest Healthcare Properties Real Estate Investment Trust (TSX:NWH.UN) could be a solid pick.

| More on:

If you’re looking for high income in your TFSA, REITs can be excellent choices.

Although they don’t always deliver frothy capital gains, their dividend yields are typically higher than the TSX average.

According to a CIBC report dated October 3, Canadian REITs have an average yield of 6%. By contrast, the TSX as a whole has an average yield of 2.53%. That means that by buying into a diversified portfolio of REITs, you can get more than twice the income you’d get by buying the TSX.

With certain individual REITs, you can get even higher yields than that. Although the average REIT yield of 6% is already absurdly high, there are plenty of individual REITs pushing 7%. In this article, I’ll explore one whose high occupancy rates and unique niche make its distribution especially high — and safe!

Northwest Healthcare Properties

Northwest Healthcare Properties REIT (TSX:NWH.UN) is a healthcare-focused REIT that leases space to hospitals, health clinics, and healthcare administrative facilities.

The REIT’s unique industry focus give it high occupancy rates and access to very dependable, long-term tenants. The healthcare industry is well known for its stability. So, it’s no surprise that Northwest Healthcare is good at attracting and keeping tenants.

In its most recent quarter, the REIT’s occupancy rate was 97.2%, up from 96.8% in the prior quarter. An improvement in this metric is highly encouraging, especially at a time when investors are worried about “the death of retail” crushing occupancy rates for other REITs.

A high and stable yield

Northwest Healthcare’s units pay monthly distributions of $0.067, which add up to $0.8 per unit annually. As of this writing, that gave a yield of 6.75%. Thanks to this high yield, if you invested your entire $63,500 worth of TFSA contribution room in nothing but NWH.UN, you’d earn $4,682 in tax-free income per year. That’s paid monthly, too, so you’d enjoy a higher frequency of payouts than you’d get with most income-bearing investments.

Excellent financial and operating results

In its most recent quarter, Northwest Healthcare released a number of excellent financial and operating metrics.

These include $31 million in funds from operations (up 19%), $70 million in operating income (up 1.5%), and $49 million in net income (up from a $57 million loss). Additionally, the REIT reduced its debt-to-book-value ratio while maintaining its dividend.

These results show that Northwest Healthcare is growing and delivering value to shareholders while working to keep its balance sheet in good shape.

Foolish takeaway

If you’re an income-oriented investor, REITs are some of the best securities to consider. Offering some of the highest yields on the TSX, they can deliver a solid wallop of cash — usually paid monthly.

Among REITs, Northwest Healthcare is one of the most stable, owing to its dependable healthcare clientele and high occupancy rates. It’s definitely one for any income-oriented investor to consider.

Fool contributor Andrew Button has no position in any of the stocks mentioned. The Motley Fool recommends NORTHWEST HEALTHCARE PPTYS REIT UNITS.

More on Dividend Stocks

dividends grow over time
Dividend Stocks

The Canadian Companies That’ve Been Quietly Raising Their Dividend Payouts

For investors seeking a combination of income and dividend growth, these stocks deserve a closer look, especially on market corrections.

Read more »

middle-aged couple work together on laptop
Dividend Stocks

2 Dividend Stocks Every Canadian Should Consider Owning

Consider buying Nutrien (TSX:NTR) and another dividend payer going into mid-June.

Read more »

Printing canadian dollar bills on a print machine
Dividend Stocks

Got $14,000? Turn Your TFSA Into a Cash-Gushing Machine

Investors seeking to generate boosted income in their TFSA should investigate the ZWC ETF. Here's why.

Read more »

Couple working on laptops at home and fist bumping
Dividend Stocks

1 Dividend Stock I’d Feel Good About Holding for the Next 7 Years

Are you looking for a stock that you can safely hold for the next seven years? This TSX stock will…

Read more »

woman gazes forward out window to future
Dividend Stocks

2 High-Yield Dividend Stocks That Could Be Safer Picks for Canadian Retirees

Given their reliable business models, high dividend yields, and visible growth prospects, these two dividend stocks are ideal for retirees.

Read more »

A meter measures energy use.
Dividend Stocks

The Utilities Play: Boring, Realiable, and Suddenly Very Profitable

Fortis (TSX:FTS) stock looks like a great, now exciting, dividend stock after a hot two years.

Read more »

woman looks ahead of her over water
Dividend Stocks

What the Average Canadian TFSA Looks Like at Age 50

Make the most of your TFSA by learning what the average Canadian TFSA looks like at 50 to see where…

Read more »

Concept of multiple streams of income
Dividend Stocks

How to Use Your TFSA to Double Your Annual Contribution

Find out how a TFSA offers unlimited wealth generation and investment income potential even when contributions are limited.

Read more »