NorthWest Healthcare Properties Real Estate Investment Trust (TSX:NWH.UN) is one of the few mid-cap stocks on the TSX that pays a reliable monthly dividend, currently yielding around 7.23%. For investors looking for steady passive income, this real estate investment trust (REIT) provides exposure to the healthcare real estate sector — a defensive industry with long-term stability. While the dividend stock has faced challenges in recent quarters, its diversified portfolio of hospitals, medical office buildings, and clinics across multiple countries offers resilience in uncertain market conditions.
The stock
The REIT’s portfolio spans Canada, Brazil, Europe, Australia, and New Zealand, ensuring geographic diversification that reduces the risk associated with any single market. The dividend stock focuses on long-term leases with healthcare providers, hospitals, and government-backed organizations, creating predictable rental income streams. As of its latest update, NorthWest maintains a high occupancy rate of 96%, with a weighted average lease term of 12.9 years. These long contracts help stabilize revenue and support the company’s monthly dividend.
Despite its strengths, the dividend stock struggled with profitability in recent quarters. In its third-quarter (Q3) 2024 earnings report, the company posted a net loss of $157.3 million, widening by $62.0 million compared to Q3 2023. This was largely due to lower net operating income, the impact of selling properties in the United Kingdom, and fair value losses related to its convertible debentures. While these factors have weighed on financial performance, management continues to focus on stabilizing operations and optimizing its portfolio.
From a valuation perspective, NorthWest’s stock trades at a price-to-book ratio of 0.68, suggesting that it is undervalued relative to its asset base. Investors often look for opportunities where a company’s stock price is trading below book value, as it may indicate potential upside. However, this discount also reflects market concerns over the REIT’s financial health, particularly its leverage. The company’s debt-to-equity ratio currently sits at 188.38% — a high level that makes it more sensitive to rising interest rates and refinancing risks.
The hurdles
Debt remains one of the biggest challenges for NorthWest. With $3.67 billion in total debt and a payout ratio exceeding 299%, there are questions about how sustainable the dividend is in the long run. While the dividend stock managed to maintain its monthly distributions so far, any further deterioration in financial performance or higher borrowing costs could put pressure on future payouts.
Yet the broader healthcare sector continues to be a strong investment theme due to favourable demographics and growing healthcare spending. An aging population and increased demand for medical facilities provide a solid foundation for NorthWest’s long-term growth. With healthcare properties typically experiencing lower volatility than other real estate sectors, the dividend stock benefits from stable tenant demand and long-term leases. These factors contribute to the REIT’s ability to deliver consistent income, making it an attractive option for dividend investors looking for monthly cash flow.
For those considering NorthWest Healthcare Properties REIT, it presents a compelling opportunity with its high yield and exposure to the resilient healthcare sector. However, its financial struggles and leverage pose risks that should not be ignored. Investors who are comfortable with some uncertainty may find the current share price an appealing entry point, especially if management successfully executes its turnaround strategy.
Bottom line
In the end, NorthWest Healthcare Properties REIT remains a high-yield monthly dividend stock with significant upside potential but notable risks. While it may not be the safest income investment on the TSX, its focus on essential healthcare real estate and long-term leases provides a strong foundation for future stability. Those willing to take on some risk for the potential of steady cash flow and capital appreciation could find this REIT an intriguing addition to their portfolio.
