Beat the TSX With This Cash-Gushing Dividend Stock

Are you ready to make some money in 2024? Then this cash-gushing dividend stock is certainly where I would start, with more improvements to come.

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Are you looking to make some cash in 2024? A high-yielding dividend stock can certainly get you there. But investors shouldn’t only consider dividends. Make sure to also look at what companies should also provide stellar returns in 2024 as well.

That’s why today we’re going to look at NorthWest Healthcare Properties REIT (TSX:NWH.UN). This dividend stock is in a prime position for future growth, with momentum in earnings and a strong, stable business model.

Why we love it 

Beating the TSX by investing in NorthWest stock requires a strategic approach focused on understanding the real estate investment trust’s (REIT’s) unique strengths and market positioning. The stock focuses on healthcare properties, which are often more stable and recession-resistant compared to other real estate sectors. It also has a diversified portfolio with properties in Canada, Brazil, Europe, Australia, and New Zealand. This geographical diversification reduces risk. 

Furthermore, NorthWest stock is actively expanding its portfolio through acquisitions and development projects. These growth initiatives can lead to increased property values and rental income. An aging population and increasing demand for healthcare services can drive occupancy rates and rental income for healthcare properties.

That being said, the last year the company had to reign in its spending. Now, the company is stronger than ever after making core asset sales. Now, further efficient property management and cost control can enhance profitability and returns to investors.

Earnings momentum

Now that we’ve learned about the company itself, it’s important to understand why the company should be such a cash-gushing dividend stock in the future. To understand that, we’ll need to get into earnings. The last few quarters have shown impressive strength after NorthWest stock’s share price fell. 

In the third quarter of 2023, Northwest Healthcare Properties REIT reported a revenue increase of 5.1% year over year, reaching $122.2 million. However, the REIT also experienced a net loss attributable to unitholders of $81.3 million, primarily due to fair value losses on investment properties. Despite this, the REIT’s same property net operating income (SPNOI) grew by 3.7% year over year, driven by annual rent indexation. The occupancy rate remained strong at 96%, with a weighted average lease expiry (WALE) of 13.2 years.

The fourth quarter of 2023 saw a continuation of strong operational performance, with revenue from investment properties rising by 4.1% compared to Q4 2022, totalling $124.0 million. The SPNOI for the quarter increased by 4.0%, reflecting the stability of their lease agreements and high occupancy rates, which stood at 97%. Despite these positive operational metrics, the REIT recorded a net loss of $188.9 million for the fourth quarter (Q4) of 2023, significantly influenced by adjustments to investment property fair values and higher interest expenses.

By the first quarter of 2024, the dividend stock reported solid operational performance with revenue from investment properties at $133.5 million, a slight decrease of 1.3% from Q1 2023 due to asset sales partially offset by rental increases. The SPNOI increased by 6.0%, reaching $88.9 million, reflecting robust operational metrics with a 96.5% occupancy rate and a 98% rent collection rate. Despite a net loss of $38.6 million, down from $89.2 million in Q1 2023 due to fair-value adjustments, the REIT’s AFFO per unit fell to $0.11 from $0.17, impacted by higher interest expenses.

Bottom line

With a dividend yield at 7.58%, shares up 20% from 52-week lows, and trading at 7.42 times earnings in the last year, the dividend stock looks prime to climb. This is why investors can certainly beat the TSX today as NorthWest stock continues to improve.

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 NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool has a disclosure policy.

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