Healthcare stocks have been in the spotlight during the coronavirus pandemic. This is unsurprising given the fact that the pandemic is the greatest public health crisis in a century.
A lot of TSX healthcare stocks have done well. Even wellness companies have outperformed, such a Jamieson Wellness, a vitamin maker.
Healthcare stocks are traditionally top defensive companies, so that’s part of the reason why they’ve done so well. In addition, as people look for ways to keep themselves healthy, wellness stocks are also getting a boost, as we see in the case of Jamieson.
With so many high-quality healthcare and wellness stocks to choose from, many investors may be wondering if a technology company like WELL Health Technologies (TSX:WELL) is the best healthcare stock to buy.
Healthcare technology company
WELL Health is an intriguing company. It combines a physical business owning several medical clinics with its digital portfolio.
I’ve always been a fan of this combination, as it earns the company cash flow at the same time as exposing it to major growth potential from its tech business.
Plus, up until now, one of the key pillars of WELL Health’s success has been its impressive acquisitions that continue to help the company to grow. That’s why its recent announcement to purchase a U.S. telehealth company looks extremely promising.
The healthcare stock was a top performer and had major long-term potential before the coronavirus pandemic. And now that the pandemic has had a positive impact on its business, the stock has had a huge year. However, some may worry that this boost is only temporary and could fade as the pandemic ends. In my opinion, I don’t think that’s likely. And while I do think the demand for some of its technology could decline slightly after the pandemic, long term, I believe it will cause the industry to shift to digital tools sooner than it otherwise would have.
The digital edge it’s bringing to a Canadian healthcare industry, which was years behind where it should be, is crucial. The industry is set to go through a massive change, introducing a lot more technology and streamlining electronic medical records, and WELL Health is leading the pack.
In general, investors buy healthcare stocks as defensive investments with low risk. And while WELL Health is a top company, with technology growth stocks that trade at major valuations, there are always significant risks.
If you want a stock that’s a bit more established and pays an attractive dividend, you could consider a stock like Northwest Healthcare Properties REIT (TSX:NWH.UN).
Defensive TSX healthcare stock
Northwest Healthcare Properties is a great TSX stock for long-term investors. It’s especially attractive for investors who are looking for income.
The company combines the defensive sectors of healthcare and real estate to offer a rare opportunity. Northwest predominantly owns hospitals and other medical office buildings. The company is very well run, and its investments are diversified in multiple countries.
That diversification has always been important but especially through the coronavirus pandemic, where every country is reacting differently and putting different rules and measures in place.
One of the top reasons for an investment in Northwest is due to the significant amount of revenue that comes from government funding. Roughly 85% of the REIT’s revenue comes either directly or indirectly from governments. Plus, it operates in a highly defensive industry, so you know its revenue is quite stable.
It has seen slight impacts on its revenue from retailers on the ground floor of its medical office buildings and hospitals during the shutdown. However, these account for very little of the REIT’s revenue and have had only a small impact on business.
The yield is still safe, in large part thanks to all the highly defensive income. That’s what makes the REIT such an attractive dividend stock. Its dividend yield is currently more than 7%.
Healthcare stocks are almost always great investments, and these two are no different. Whether you want a high-potential-growth stock like WELL or a safe high-yield dividend stock like Northwest Healthcare Properties, these are two of the most attractive stocks on the TSX.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Daniel Da Costa owns shares of NORTHWEST HEALTHCARE PPTYS REIT UNITS. The Motley Fool recommends NORTHWEST HEALTHCARE PPTYS REIT UNITS.