Better Dividend Stock for Passive Income: NorthWest REIT or Nexus REIT?

These two dividend stocks offer passive income above 8%, but which is the better (and safer) buy on the TSX today?

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Canadian investors continue to focus on high-yield dividend stocks for passive income these days. And as well, they should! This can be a great benefit, as we continue to hope the market is on the recovery. But investors need to be careful. Dividend stocks can look great until they cut their dividend. Or worse, see shares plummet to the floor.

That’s why today we’re going to look at two strong, high-yielding dividend options. Which is better: NorthWest Healthcare Properties REIT (TSX:NWH.UN) or Nexus Industrial REIT (TSX:NXR.UN)?


NorthWest stock has long been a high-yielding dividend payer that many investors got into during the pandemic. The company saw its share price surge as it continued to see investment in the healthcare sector. What’s more, it used its capital to expand on a global scale. The real estate investment trust (REIT) has an international portfolio to be admired.

However, it seems some of that capital should have gone towards maintaining its dividend. NorthWest stock has since seen share prices plummet, as many investors got away from healthcare stocks, looking to make returns instead.

Now, NorthWest stock has shares at about a third of where they were at their peak. Plus, it had to cut its dividend by more than half from $0.80 to $0.36 per share annually. Now, it’s selling off assets to continue feeding its bottom line.

The big question is whether or not the worst is over and if now is the time to get back in. That could be, given its trailing price-to-earnings ratio (P/E) is at 7.42 and it’s price-to-sales ratio is 2.19. However, the company’s payout ratio is still absurdly high at 299%, with a debt-to-equity (D/E) ratio of 123%. So, there is certainly work to be done, even with an 8% dividend yield.

Nexus stock

As for Nexus stock, it’s gone through a rough patch as well. The industrial property holder has seen shares drop lower and lower as it continues to try and make it out of this high interest rate and inflation environment. The company has seen its fair value shrink amongst all these high-priced environments as well as seeing costs rise.

Even so, I believe that the future is a bit more bright for Nexus REIT. That’s because of the industry of industrial properties in general. These are low-cost properties that are sorely needed in Canada and around the world.

We need these properties to store, ship, and assemble the products we now demand practically instantaneously. Nexus stock has seen its shares start to recover as the market has done so as well because of this as well as earnings. Most recently, it was actually acquiring properties rather than selling them, seeing operating income rise and occupancy remain stable at 97%.

And the stock certainly holds value. Nexus currently trades at 4.26 times earnings as of writing, with shares down 26% in the last year. Its D/E ratio needs work at 129%, but its payout ratio is very healthy at 36%. In fact, there could be a rise in the future for the 8.57% dividend yield.

Therefore, it’s pretty obvious that of the two, I would go with Nexus stock on the TSX today. If you’re looking for stable passive income in this volatile environment, it’s certainly the one I would consider.

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 has positions in NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool recommends Nexus Industrial REIT and NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool has a disclosure policy.

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