NorthWest Healthcare Properties REIT (TSX: NWH.UN) is a rare kind of real estate investment trust (REIT). It owns and operates hospitals, clinics, and medical offices across the world. And while it’s true that the stock has fallen more than 57% over the past five years, dismissing it solely on that drop would miss the larger story. In fact, this REIT still owns some of the most stable, necessity-based assets on the TSX, and the groundwork it’s laying today could make it one of the best lifetime dividend holdings for patient investors.
About NWH
NorthWest Healthcare Properties REIT is a globally diversified healthcare landlord. It owns over 230 medical properties across the world, focusing on hospitals, rehab facilities, outpatient clinics, medical office buildings, and more. These are long-term leases between 10 and 20 years! All with rent escalators tied to inflation.
Alright so if it’s so stable, why the drop? Over the last five years, shares slumped from $13 in 2020 to about $5 as of writing. This price drop wasn’t caused by weak tenants or collapsing occupancy. Instead, three main forces hit at once. Those were higher interest rates, causing debt to surge; asset sales and write downs; as well as overall market sentiment.
Despite the market pain, the REIT maintains incredibly efficient operations. Occupancy sits above 96%, with weighted average lease terms at 13 years, among the longest of any Canadian REIT! Furthermore, nearly 100% of rent was collected through the pandemic and beyond, with inflation linked to more than 70% of rental income.
Into earnings
Now let’s fast forward to today, because while shares are down from pre-pandemic levels, they have recently risen. In fact, year to date the dividend stock is up 12%! And part of this comes down to recent quarterly earnings.
In the latest second quarter results, revenue was up 5% year over year to $115 million, with funds from operations at $0.16, rising from $0.14 the year before. The interest-coverage ratio also improved to 2.7 times from 2.3 times in 2023 thanks to refinancing and asset sales.
This is happening while the company continues to see performance improve. New joint ventures in Australia and Europe have brought in institutional capital, freeing up cash. It also has a weighted average interest cost at 4.5%, down from over 5% at its peak. Better still? NWH.UN looks valuable trading at 11.6 times forward earnings and 0.82 times book value. All while offering a 7.3% dividend yield!
Bottom line
NorthWest Healthcare REIT’s share price has been punished for leverage, not for business weakness. Beneath that 57 % decline lies a portfolio of essential medical properties, world-class tenants, and a newly right-sized dividend that’s fully covered by cash flow.
No REIT is risk-free, but few combine this level of global diversification, stable tenants, and yield potential. For investors who can tune out near-term volatility and focus on lifetime income, NorthWest Healthcare REIT still ranks among the best lifetime dividend stocks on the TSX. And with a 7.3% dividend yield, it can improve the health of any portfolio.
