Down 53% and Paying Monthly: 1 Dividend Stock I’d Buy Hand Over Fist

NWH.UN pays a juicy 6.9% yield, but big payout ratios and tenant risks mean this healthcare REIT is a risky rebound play.

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Key Points

  • Offers a 6.9% yield, but a roughly 300% AFFO payout ratio makes the dividend highly risky and potentially unsustainable.
  • Financials are improving: occupancy ~96.6%, long lease expiries, and reduced leverage, which could support recovery.
  • Watch risks: major tenant Healthscope, suspended DRIP, and interest-rate sensitivity before buying or averaging in.

When stocks are down, it can be hard to convince investors to get back in once more, especially if those stocks have gone from a surge to a slump. That’s been the case for NorthWest Healthcare Properties REIT (TSX:NWH.UN). This dividend stock was performing well until interest rates began to rise.

But now, with shares down 8% in the last year and 53% in the last five years, perhaps it’s time to consider the stock once more, especially as the dividend stock offers a 6.9% dividend yield, and shares are actually up 4% in the last month! So, let’s look at what to watch for this dividend stock.

What to consider

First, let’s look at what to consider before diving into any dividend stock. First, there’s the financial health. Investors will need to assess the company’s balance sheet, focusing on debt levels, cash flow, and the ability to sustain dividends. A high debt-to-equity (D/E) ratio can be concerning, especially if cash can’t cover liabilities.

Then there’s the dividend itself. If a payout ratio is high, it may not be able to sustain that dividend. A payout ratio over 100% can indicate that the company pays more in dividends than it earns. That’s not ideal for the long run.

Finally, think macro and micro. External factors like interest rates and economic conditions can impact the company’s sector. As for micro factors, be aware of any recent business challenges or strategic changes that could impact performance. So, let’s see what’s affecting NWH.

Where NWH sits

In terms of finances, NWH’s net income recently improved, shifting from a loss in the previous year to a profit in the second quarter of 2025. This came from decreased interest expenses and fair value gains on its investment properties. It also managed its capital through dispositions to repay debt, reducing leverage from 50% to 48.5%.

For the dividend, the adjusted funds from operations (AFFO) payout ratio came down, showing an improved dividend coverage. The dividend now sits at 6.9% with a payout ratio of 300%, so it is still not ideal when it comes to future dividend sustainability. That being said, strength is still there from its high occupancy rate of 96.6% and lease expiries at an average of 13.5 years. And now interest rates have come down, long-term demand and government-backed tenants are on deck, so the company is looking quite solid.

Still, there are factors to consider. This includes the suspension of its DRIP program to optimize the preservation of capital. Plus, major tenant Healthscope faces financial difficulties, so this could also impact revenue.

Bottom line

NWH is a strong investment if you’re looking for a rebound investment among dividend stocks in the stable healthcare sector. It’s improving its bottom line, and that can be enormous for long-term holds. Meanwhile, you can create massive income from dividends. For instance, here’s what a $7,000 investment might look like today.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCYTOTAL INVESTMENT
NWH.UN$5.181,351$0.36$486Monthly$6,996

Therefore, NWH looks like a promising investment for those looking for exposure to healthcare infrastructure, especially as the company continues to improve its financial flexibility amid current market challenges.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool has a disclosure policy.

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