1 Under-$10 Dividend Stock to Buy for Monthly Passive Income

Supplement your monthly income by investing a portion of your surplus money in this under-$10 stock.

Sneha Nahata

Sneha is a M.Sc. in finance and has been a Motley Fool contributor since mid-2020. Sneha specializes in writing about bank, energy, consumer and TMT (technology, media, and telecom) stocks. She focuses on identifying winning long-term stock picks.

Published September 8, 2023 2:45 pm EDT

| More on: NWH.UN

Dividend-paying stocks are reliable sources to create a passive-income stream. While stocks are volatile, the dividend payout of fundamentally strong businesses remains steady, enabling investors to generate stable passive income.

For instance, the TSX has several high-quality, dividend-paying stocks like Fortis and Enbridge. These Canadian corporations have consistently paid and grown their dividends for decades, making them a compelling investment to earn worry-free passive income. Meanwhile, companies like Canadian Natural Resources and goeasy are Dividend Aristocrats and are growing their dividends extremely fast.

However, these companies offer quarterly payouts. Here, I’ll focus on a stock that pays a monthly dividend and offers a lucrative yield. But before discussing the stock, it’s important to highlight that dividend payments are not guaranteed and depend on a company’s operating environment and financial performance. Thus, one must diversify investments across multiple stocks and sectors to lower risk.

Against this background, let’s delve into a top Canadian stock that pays monthly cash. Further, the stock is trading cheap, under $10. You can supplement your monthly income by investing a portion of your surplus money in this stock.

The under-$10 dividend stock for passive income

Speaking of under $10 passive-income stock, investors could consider investing in NorthWest Healthcare Properties REIT (TSX:NWH.UN). Notably, REITs (real estate investment trusts) are famous for their higher payout ratio, making them attractive investments to earn passive income.

As for NorthWest Healthcare, the stock has recently given up a substantial portion of its value, which has driven its yield higher. Meanwhile, it is trading incredibly cheap, making it a compelling buy near the current levels.

NorthWest Healthcare pays a monthly dividend of $0.067 per share. This reflects a high yield of 11.9% (based on its closing price of $6.72 on September 7). Besides its lucrative yield and low share price, let’s look at other factors that make NorthWest Healthcare a solid stock to earn monthly passive income.

Why is NorthWest Healthcare a reliable passive-income stock?

NorthWest Healthcare owns a defensive portfolio of healthcare-focused real estate infrastructure. Its assets are geographically diversified and located in major markets, including the Americas, Europe, and Asia-Pacific.

The company invests in some of the growing, in-demand urban centres across the most prominent and strongest healthcare markets. This strategy supports its growth. Moreover, the company targets the cure segment of the healthcare real estate spectrum, implying that it owns hospitals, ambulatory care centres, multi-tenant medical office buildings, specialty clinics, and other healthcare-related assets. Furthermore, the company’s tenants are big hospital operators or healthcare practitioners supported by direct or indirect government funding.

As its real estate infrastructure and tenants provide essential services, the demand for NorthWest’s assets remains high.

Moreover, NorthWest Healthcare owns 231 properties with a high occupancy rate of 96%. Further, its weighted average lease expiry term stood at 13.5 years. The high occupancy level and long lease expiry term add stability and visibility to its cash flows. In addition, about 82.5% of its rental income is subject to inflationary adjustments. This allows the company to grow organically and deliver strong same-property net operating income.

Bottom line

NorthWest Healthcare has high-quality real estate and strong fundamentals that position it well to continue to offer regular dividend payouts. However, its stock corrected quite a lot in the recent past due to the temporary increase in debt. Nonetheless, the company is taking measures to lower its leverage profile, which will cushion its bottom line and support its payouts.