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

Here’s why NorthWest Healthcare Properties REIT (TSX:NWH.UN) is a REIT that may be worth buying on its recent dip for solid passive income.

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For investors looking to create passive income in the stock market, finding top-tier dividend stocks is important. The thing is, with rising interest rates, many companies providing higher yields have been hit hard. NorthWest Healthcare Properties Real Estate Investment Trust (TSX:NWH.UN) hasn’t been immune to this trend. Looking at the company’s stock chart below, it’s clear investors don’t view this company the same way anymore.

That said, this REIT does provide a meaningful dividend yield just shy of 7.5% at the time of writing, largely due to its recent decline. Here’s why I think opportunistic investors may want to jump at the opportunity to acquire NWH stock at current levels.

What does NorthWest Healthcare Properties REIT do?

As its name suggests, NorthWest Healthcare Properties REIT provides investors with exposure to a range of medical buildings, hospitals and clinics across Canada, Brazil Germany and Australasia. The company employs more than 300 workers across its 10 offices in eight countries, serving as a long-term real estate partner in the healthcare sector.

As far as tenant stability is concerned, having healthcare operators as the company’s core clientele provides some of the best tenant stability in the real estate space. There is some cyclicality to certain clients for sure, but over the long-term, we all need healthcare. This stable demand leads to strong occupancy rates, and similarly strong cash flows the company is able to pay back to shareholders in the form of distributions.

Financials remain strong

This REIT has certainly stumbled in recent quarters, with its fourth quarter 2023 results showing net income of only $0.13 per share. Given the company pays a dividend of $0.03 per month, or $0.09 per quarter, most of the company’s earnings go to fund its dividend. And while that’s the way these trusts are structured, many investors may like to see more robust earnings growth, which could be passed on in the form of higher dividends.

The company did see strong occupancy levels and should continue to see rent growth over time. The thing is, the market appears to be punishing bond-like proxies, given the relative attractiveness of longer-term U.S. government bonds near 5%. This stock has a similar yield, but may continue to underperform if bond yields continue to rise.

Monthly passive income is nice

One of the things I like most about NorthWest Healthcare Properties REIT is how it structures its dividends. Monthly payments provide the kind of cash flow many retirees are looking for. Instead of building complicated bond ladders, or acquiring shares of companies that pay dividends on various months, investors can buy one simple income-generating stock that can do it all.

Over the long-term, I do see the capital appreciation growth prospects for this REIT as being solid. Obviously, this REIT has underperformed of late. But being a true long-term investor requires buying stocks when they’re beaten up and holding them. This is one I think is worth buying on this recent dip.

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 Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool recommends NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool has a disclosure policy.

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