Investors planning to invest in top dividend-paying stocks for monthly passive income could consider investing in Northwest Healthcare Properties REIT (TSX:NWH.UN). This real estate investment trust (REIT) offers an attractive yield of 6.4% based on its closing price of $5.60 (September 24, 2024). Moreover, it pays cash every month.
Why Is Northwest a reliable monthly dividend stock?
Northwest owns and operates a portfolio of high-quality healthcare real estate located across Canada, Europe, and Asia-Pacific regions. Moreover, it focuses on the cure segment of the healthcare real estate spectrum, and its properties include hospitals, outpatient centres, medical offices, and specialized healthcare facilities.
The healthcare sector is known for its resilience and stability compared to other real estate sectors. Moreover, it delivers strong returns. Further, an aging population drives consistent demand for healthcare facilities and services, making healthcare real estate a particularly attractive investment.
Another advantage of healthcare properties is their essential nature. Many of these properties have long-term leases, often backed by government funding, which helps ensure steady cash flows.
Northwest’s portfolio has proven resilient by consistently generating strong rental income, maintaining high occupancy levels, and benefiting from long-term inflation-indexed leases. As of the second quarter (Q2) of 2024, the portfolio had a remarkable occupancy rate of around 97%, with an average lease expiry term of 13.4 years. Furthermore, over 85% of these leases are tied to rent indexation, which provides a hedge against inflation.
Northwest has more than 1,800 tenants. This implies that its cash flows are highly diversified. In addition, the REIT achieved an impressive global rent collection rate of nearly 99% as of June 30, 2024. In the first half of the year, Northwest executed leases for 810,000 square feet of space, retaining over 80% of its tenants. This indicates the high demand for its properties and positions it well to generate steady operating income and cash flow.
The outlook for Northwest
Northwest Healthcare Properties is well-positioned to capitalize on the rising demand for healthcare facilities. With its solid tenant base and solid portfolio of healthcare properties, the REIT is expected to maintain strong demand from healthcare providers and operational partners.
The company is also committed to streamlining its operations and reducing costs, a strategy that will further enhance efficiency and generate cost savings in the coming quarters.
In the first half of 2024, Northwest took significant steps to strengthen its financial position by divesting 23 non-core properties and unlisted securities, generating $430 million in proceeds. Over the past year, the company sold 46 properties and investments, netting a total of $1.6 billion. These divestitures allowed Northwest to reduce its outstanding debt by $1.2 billion, bringing it down to $3 billion. Additionally, the company decreased its consolidated debt-to-gross-book-value ratio to 47.1%, including convertible debentures.
Northwest remains committed to improving its leverage, extending debt duration, and strengthening its financial position.
In addition, the recent interest rate cut by the Bank of Canada signals the beginning of a monetary easing cycle. Lower borrowing costs could spur additional real estate investments, benefiting REITs like Northwest.
The bottom line
Northwest Healthcare Properties REIT is an attractive investment for investors seeking reliable monthly dividend income. With a 6.4% yield and a portfolio of high-quality healthcare properties, it remains well-positioned to generate stable cash flows and enhance its shareholders’ value through regular dividend payments.
