Passive income is among the top investing goals of many investors. It works for you so you don’t have to. It’s also a safety net, and an ideal way to supplement your income. In this article, I’d like to review two top passive income stock ideas that can provide you with reliable monthly income.
They are defensive stocks that are benefitting from the growing healthcare industry, as the population continues to age.
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Chartwell Retirement Residences
Chartwell Retirement Residences REIT (TSX: CSH.UN) is Canada’s largest provider and owner of seniors housing communities from independent living to long-term care.
The last few years have been difficult ones for the likes of Chartwell. First came the pandemic, which wreaked havoc on occupancy rates and increased costs. Then came higher interest rates, which have hit real estate investment trusts such as Chartwell in the form of higher interest expense.
But through it all, Chartwell has remained intact, as it has continued to pay out its dividend throughout the last few years. In fact, today, Chartwell’s monthly dividend is 4.1% higher versus five years ago. This, along with its current yield of 5.28%, makes Chartwell worth considering for your passive income needs.
Behind these numbers is a business that has proved to be quite resilient and in demand. This is demonstrated in Chartwell’s occupancy levels, which are rising fast. In fact, occupancy rose 80 basis points sequentially in September to 82.1%. Also, it rose 100 basis points in October to 83.1%, and another 110 basis points in November to 84.2%. While this is below rates of above 90% before the pandemic, it’s certainly rapidly heading in the right direction.
As far as Chartwell’s debt goes, it’s rapidly declining. Chartwell’s current long term debt balance amounts to $1.5 billion, compared to highs of $2.3 billion in 2020. In closing, investing in Chartwell is a great passive income idea for the long haul.
Northwest Healthcare Properties for generous passive income
As another real estate investment trust in the healthcare space, Northwest Healthcare Properties REIT (TSX:NWH.UN) is also benefitting from the aging population trend. And it’s also one of the top passive income investing ideas.
Northwest is the owner and operator of health care properties around the world, and given the aging population, these properties will continue to be in high demand for years to come. Consequently, Northwest is a highly defensive business. This manifests in many ways, such as the fact that the buildings are characterized by long-term tenancy, with a weighted average lease expiry of almost 14 years. Also, Northwest Healthcare’s revenues are inflation-indexed.
Unfortunately for Northwest’s shareholders, the company recently got into trouble because of its heavy debt-load. This meant that its dividend had to be slashed by more than 50% back in September. This is clearly not a good outcome. However, the strong fundamentals of the business keep me interested in this stock.
For example, in Q3 2023, revenue increased 5.1% and 15.3% in the first three and nine months of 2023, respectively. Similarly, net operating income increased 3.7% in the quarter, as occupancy came in at 96%.
Today, Northwest is yielding 7.5%, making it a solid option for monthly passive income. While the company is not out of the woods yet with its debt problem, it is divesting of noncore assets. The proceeds will be used for debt repayment.
