High-yield dividend stocks are always worth investigating. While these stocks can spell danger, they can also sometimes be some of the greatest opportunities for yield and dividend income. If the market is mispricing the stocks, then the high yield is not actually a danger sign, but an opportunity knocking.
As a retiree, you don’t want to risk your money, of course. So, let’s take a look at two high-yield stocks that are actually relatively safe bets.
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Northwest Healthcare Properties REIT
Northwest Healthcare Properties REIT (TSX:NWH.UN) is an owner and operator of healthcare properties. Its portfolio includes hospitals, outpatient and ambulatory care centres, and medical office buildings.
Today, Northwest Healthcare Properties is yielding a very juicy 7%. It’s a stock that was hit about 2 years ago after an aggressive acquisition strategy left it saddled with debt, and rising interest rates made Northwest’s dividend payments impossible to maintain. Therefore, the dividend was cut and the stock took a nosedive. Northwest’s stock now sits at approximately $5.00, a level it has been stuck at since 2023.
But Northwest has taken steps to fix the wrongs of the past, and the market does not seem to be recognizing this. The REIT is refocusing and simplifying its business – dispositions are bringing in some much-needed cash flows. In turn, Northwest’s leverage and payout ratio are falling. In the latest quarter, its adjusted funds from operations increased 16% to $0.11 per share. This puts its payout ratio at 85%, compared to 99% in the same period last year.
The bottom line is that this business is one that lends itself well to passive income. This is because medical real estate is very much in demand and has low turnover. Currently, Northwest’s assets have leases with a weighted average expiry of 13.4 years. The occupancy rate is at 96.9%, and 85% of the leases are subject to rent indexation. Simply put, this portfolio of assets is defensive and predictable.
And now that Northwest is de-risking its business, I believe that this high-yield is a great opportunity to get exposure to low-risk cash flows and solid passive income for your TFSA.
Telus
Telus Inc. (TSX: T) is another high-yield dividend stock that is a great opportunity for retirees to boost their passive income. Its current dividend yield is almost 10%, as the stock price was hit when the company recently put a stop to its dividend growth program.
While investors reacted negatively to this news, we should keep in mind that Telus didn’t actually cut its dividend. And notably, the company provided a very bullish three-year cash flow target – free cash flow growth at a minimum compound annual growth rate of 10%. This will be driven by Telus digital’s strong cash flow generation, the Terrion partnership, and some key divestitures.
With these moves, Telus’ balance sheet will be strengthened and its cash dividend coverage ratio will be 75% of free cash flow. So maybe investors’ reaction to the news was too extreme. If we buy Telus stock right now, we’ll be paid very well.
In my view, Telus stock is currently a once-in-a-lifetime opportunity to scoop up one of Canada’s leading telecom companies on the cheap.
