Sure, on the surface a $250 purchase may not look like all that much. And really, it may not be to most. But to some, that’s a grocery bill, maintenance fees, and cash that could be put elsewhere instead of investing. So when I tell you I’m investing $250, know that every single dollar I invest comes with great thought.
That’s the case for this high-yielding dividend stock. Shares continue to be down a remarkable amount, but I foresee great things. What’s more, it continues to offer stable cash flows, as well as a solid dividend yield that will keep me coming back.
Why I’m buying NorthWest REIT
The NorthWest Healthcare Properties REIT (TSX:NWH.UN) has been in my portfolio for some time now. I purchased it before the pandemic, and saw it climb to astounding heights. While the dividend has remained unchanged since coming on the market, it has still provided a high yield. That yield means high monthly payouts at little cost.
But, of course, lately it has been a different story. Shares of NorthWest REIT are down a whopping 47% in the last year alone. Part of the drop came as the real estate investment trust (REIT) announced it would be bowing out of a joint venture between it and a United Kingdom-based company. It fell further as it settled litigation with investments in Australian Unity.
This sent investors running for the hills, with NorthWest REIT trading at lows not seen, well, ever! These all-time lows, however, are exactly why right now is a great time to pick up the stock.
Think bigger than interest rates
The fear around REITs right now are interest rates and inflation. Rising costs are making it harder to take care of properties and make acquisitions. Interest rates are rising, too, making it harder to borrow cash. These are all realities today, but also temporary situations.
We are already seeing stabilization in the economy not just in Canada but around the world. As inflation and interest rates stabilize, we’ll likely see the movement towards using cash on hand to make more acquisitions. That would include NorthWest REIT, which has a history of making acquisitions of healthcare properties all over the world.
And that’s key here: healthcare. These are properties which will continue to be needed no matter what happens in the world. And while the UK venture may have fallen through, the stock still has a large portfolio that spans the globe. All while maintaining long-term lease agreements and high occupancy rates.
Earnings speak to long-term growth
Of course, the recent share movement certainly did not help matters for NorthWest REIT. Net income is down to a loss of $89 million as of the latest quarter. That’s compared to a profit of $123 million the year before. Its assets now sit at $2.8 billion, and revenue has been climbing.
Revenue was up to $39.9 million in 2023 compared to $35.3 million the year before. The stock continues to have an average lease agreement at about 14 years, as of writing, and an occupancy rate at about 97%. That’s 97% of lease holders paying cash into pockets for the next 14 years!
That’s 14 years of perhaps not stable share prices, but stable dividend income. And honestly, in my scenario, I can afford the wait. Overall, shares are likely to get back to normal, which is why I’m not worried. Instead, I’m seizing the opportunity to bring in more passive income. And that $250 would bring in about $30 in annual income right now! So if you like passive income, I wouldn’t wait a moment longer while it holds a dividend yield at 12.62%.
