Stock Market Correction: Buy This Correction-Proof Stock

A stock market correction can be scary, but it’s certainly less so when you have strong companies in your portfolio to fight any drop on the TSX today.

| More on:
edit Safety First illustration

Image source: Getty Images

The S&P/TSX Composite Index continues to drop — unfortunately, for Motley Fool investors. Several factors have been weighing on the TSX today, causing a market correction just in time for the holidays. But the question is whether it’s a gift or a curse.

If you’re looking at your portfolio, you’re probably thinking the latter. However, the former definitely holds some weight. Right now, there is an opportunity to buy correction-proof stocks that offer one thing other growth stocks usually don’t: dividends.

If you find the right dividend stock, it can be an incredible asset during a stock market correction. So, let’s look at one option to buy today and hold forever.

The right industry

First, Motley Fool investors need to find the right industry when it comes to companies that will remain strong, even in a stock market correction. You might think about gold, but while gold does well in a stock market correction, it can just as easily reverse once that correction is over.

So, what you need is something solid — a company that will continue to bring in revenue, even during this period of downturn. Furthermore, you need a company that ideally will continue to bring in revenue for decades and support dividend payments to boot. And there’s one company I have in my portfolio that I would consider on the TSX today.

NorthWest Healthcare

Healthcare stocks can go up and down, but when combined with real estate, these are the perfect companies during a stock market correction. Health care or real estate on their own aren’t the best correction-proof investments. But together, it’s a winning combination.

The reason is that, as we’ve learned, healthcare real estate remained an essential service during the pandemic. And that was the case for NorthWest Healthcare Property Units REIT (TSX:NWH.UN). Not only did NorthWest continue to have its doors open, but it actually managed to renew lease agreements during this time. That’s thanks to low interest rates causing leasers to resign deals, with an average of 14.1 years on agreements.

That extra cash allowed NorthWest to expand, bringing in not only stable revenue but an increase as well. The company bought properties in the Netherlands and an Australian Healthcare REIT, and it recently picked up Aspen Healthcare UK.

Combined, the company certainly became a recession-proof during the stock market correction. Its latest earnings report proved as much. Occupancy remained strong at 96.9%, with its international portfolio at 98.5%. Total assets under management increased 15.1% year over year to $8.5 billion, with its net asset value up 10.8% to $13.60 per unit.

Still strong value

Now, on the one hand, you’re not going to see the major jumps in share price from NorthWest, but that’s also why you want it during a stock market correction. The company remained stable. even as the TSX today is down 3% from 52-week highs. By comparison, NorthWest is only up 4% year to date, but it has remained at a steady increase for the last year.

And that’s why its dividend remains so solid at 5.86%. Motley Fool investors can look forward to literally decades of income thanks to its long-term lease agreements. Furthermore, that’s set to increase with all of these new global expansion projects on the books.

The entrance into the United Kingdom is especially exciting, adding 13 hospitals in the area, with 100% occupation! As NorthWest continues to expand, shares are only set to climb higher at a stable rate.

Yet this stock is of incredible value, trading at 6.51 times earnings and an EV/EBITDA of 6.98. It also has a target price of $14.77, giving it a potential upside of 12% as of writing. So, if you want a stock that will see you through any stock market correction, I would put NorthWest at the top of your list.

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 Amy Legate-Wolfe owns shares of NORTHWEST HEALTHCARE PPTYS REIT UNITS. The Motley Fool recommends NORTHWEST HEALTHCARE PPTYS REIT UNITS.

More on Dividend Stocks