Monthly-paying dividend stocks are an excellent addition to investors’ portfolios because their regular payouts generate a stable passive income, allowing them to meet recurring expenses. Investors can also reinvest the passive income to earn superior returns. Against this backdrop, let’s compare the following two REITs (real estate investment trusts) that offer over 6% of dividend yield to decide which would be a better buy right now.
NorthWest Healthcare Properties REIT
NorthWest Healthcare Properties REIT (TSX:NWH.UN) owns and operates 186 healthcare properties, with a gross leasable area of 16.1 million square feet. The company has signed long-term lease agreements with government-backed tenants. The weighted average lease expiry of these clients stands at 13.4 years. The company enjoys a healthy occupancy and collection rate supported by these long-term lease agreements and a quality tenant base. The company’s global occupancy and collection rates in the June-end quarter stood at 96.5% and 99%, respectively. Further, the inflation-indexed rent shields its financials against rising prices.
After being under pressure over the last two years, NorthWest Healthcare has witnessed healthy buying this year amid falling interest rates and improving financial position through the non-core assets sales program. Since adopting the non-core assets sales program, the company has sold 46 properties, generating gross proceeds of $1.4 billion. The company has utilized net proceeds from these sales to pay off higher interest rate-bearing debt, thus lowering its leverage and strengthening its financial position. Besides, the company is developing next-gen properties to deliver long-term earnings growth for its shareholders.
Moreover, NorthWest has witnessed healthy buying over the last few months, with its stock price rising 36.7% compared to its March lows. Despite the healthy buying over the previous few months, it trades at an over 60% discount compared to its 2022 highs. Also, its NTM (next-12-month) price-to-sales multiple stands at 3.3. Further, the company currently pays a monthly dividend of $0.03/share, translating its forward yield to 6.62%.
SmartCentres Real Estate Investment Trust
SmartCentres Real Estate Investment Trust (TSX:SRU.UN) is a fully integrated commercial and residential REIT with 195 properties nationwide. It owns around 35.2 million square feet of leasable space and enjoys a 98.2% occupancy rate. The average age of these leases stands at 4.3 years. Its net operating income on the same properties increased by 2.2% in the June-ending quarter amid lease-up activities and lease extensions at higher rates. The company leased around 272,000 square feet of vacant space and extended 86.2% of the leases maturing this year with a rental growth of 8.5%.
The company continues to lease its 458-unit purpose-built rental space, The Millway, with around 88% leased by the end of the second quarter. Meanwhile, the company is confident it will increase the property’s occupancy rate to 95% by the end of this year. Further, the company has a solid developmental pipeline, with 57.5 million square feet of developmental permissions and 0.8 million square feet of sites under construction. These growth initiatives could boost its cash flows, thus allowing SmartCentres REIT to reward its shareholders with healthy dividends. It currently pays a monthly dividend of $0.1542/share, with its forward yield at 6.77%.
Supported by solid quarterly performance and interest rate cuts, the company has witnessed healthy buying this year, with its stock price rising 15.8% year to date. Amid the recent buying, its NTM price-to-sales multiple has increased to 4.2.
Bottom line
Although both REITs offer over 6.5% dividend yield, I believe NorthWest Health would suit risk-averse investors due to its defensive healthcare portfolio and government-backed tenants. Meanwhile, SmartCentres REIT offers healthier growth prospects, given its solid developmental pipeline, thus making it attractive for investors with higher risk-taking abilities.
