Investing in monthly dividend stocks allows you to generate a passive income stream at a low cost. Northwest Healthcare Properties (TSX:NWH.UN) is a Canada-based real estate investment trust (REIT) that pays investors a monthly dividend and offers a forward yield of 7.3%.
Let’s see if income-seeking Canadians should invest in this TSX dividend stock in March 2025.
An overview of Northwest Healthcare Properties
Northwest Healthcare Properties owns, manages, and develops real estate exclusively for healthcare, research, life sciences, and education tenants. With operations spanning eight countries, Northwest has established itself as a global leader in the healthcare real estate sector.
The REIT’s strategic focus is on the “cure segment” of healthcare real estate—primarily hospitals, medical office buildings, and clinics. Northwest’s properties are located in major urban centres to maximize accessibility and create synergies between complementary healthcare services. Moreover, these properties are characterized by long-term inflation-indexed leases and stable occupancy rates.
Northwest’s portfolio includes diverse healthcare facilities, from core infrastructure hospitals to specialty clinics and research facilities. Its tenant base consists predominantly of large hospital operators and healthcare practitioners whose services are often supported by government funding.
Key global health trends, including aging populations, the resilient nature of the healthcare sector, and advancements in medical research and life sciences, shape Northwest’s investment approach.
A strong performance in Q3 of 2024
Northwest’s portfolio performance remains robust, with consolidated same-property net operating income increasing by 5% in the third quarter (Q3) of 2024 compared to the same period last year. The portfolio maintains a 96% occupancy rate, underpinned by a weighted average lease expiry (WALE) of 13.4 years, with over 86% of leases subject to rent indexation. Moreover, global rent collection remains strong at nearly 99%.
“Q3 was a strong quarter for execution as we continue to reduce leverage, make major strides in lowering G&A [general and administrative] expenses and minimize near-term debt expiries, all while maintaining operational excellence,” said Craig Mitchell, chief executive officer of Northwest Healthcare REIT.
During the quarter, Northwest executed 369,000 square feet of leasing deals at a retention rate of 88%. It also strengthened its long-term income stability by extending key leases in Brazil, including a 10-year renewal for Sabara Hospital, addressing its only major 2025 lease maturity. Major early lease extensions were also achieved across five hospital assets in Australasia, extending the global portfolio WALE from 12.9 years in Q2 to 13.4 years in Q3.
On the financial front, NorthWest reported funds from operations (FFO) per unit of $0.11, excluding the impact of accelerated amortization of deferred financing fees. This represents an increase from the comparable $0.09 per unit in the year-ago period due to interest and operating expenses improvements. Its adjusted FFO per unit stood at $0.09, representing a payout ratio of 99%.
The REIT has made substantial progress in addressing debt maturities, with over 80% of 2025 maturities now resolved. Since Q2, Northwest has repaid, refinanced, or extended $1.1 billion in debt.
Its proportionate debt has reduced from $3.6 billion at the end of 2023 to $2.7 billion in Q3, lowering leverage by 160 basis points to 57.3% and consolidated leverage by 270 basis points to 49.2%.
Northwest reduced its workforce by approximately 16% during Q3, which is expected to result in annualized cash savings of approximately $6.5 million.
The Foolish takeaway
Analysts expect Northwest’s AFFO to expand from $0.39 per share in 2024 to $0.44 in 2025 and $0.5 in 2026. The REIT pays shareholders an annual dividend of $0.36. So, its payout ratio is forecast to improve from 92.3% in 2024 to 81.8% in 2025 and 72% in 2026.
Alternatively, investors should note that the TSX stock was forced to lower its dividends from $0.80 per share in 2023 to $0.36 per share due to higher interest rates and a challenging macro environment.
