High-yield monthly dividend stocks can offer a TFSA portfolio some welcome torque. When we find one that also offers a favourable risk profile, offering predictability, stability, and resilience, then we could have a valuable option to consider.
A monthly yield offers investors a regular and frequent passive income stream to supplement their regular income. These cash payments can also be reinvested, thereby compounding returns in order to maximize wealth creation.
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Monthly cash payments from a healthcare REIT
Vital Infrastructure Property Trust (TSX: VITL.UN) is a real-estate income trust that pays out monthly. Its healthcare properties are strong, income-producing properties that have defensive characteristics.
Healthcare spending is essential, and therefore, resilient. Rents are inflation-adjusted. Tenants are longer-term tenants. The very makeup of Vital Infrastructure Property Trust’s business is one that embodies safety, predictability, and long-term resilience.
Correcting past wrongs
The sentiment around Vital Infrastructure stock is not good at this time. Investors remember the dividend cut a couple of years ago as debt levels were high after an overly aggressive acquisition strategy. In the end, this dividend stock could not sustain its dividend and the company embarked on a transformation strategy.
A new CEO, divestitures, debt repayment, and a refocusing of the business on select geographies are all intended to bring the business back to stability. And this is working. Vital’s Q3 earnings results included strong operating results, mixed with continued progress in paying down debt and improving its balance sheet.
Strengthening financials
Adjusted funds from operations (AFFO) came in at $0.10 per share for the quarter, down $0.01 versus last year. AFFO for the first nine months of the year came in at $0.31, which increased $0.01 versus last year.
Importantly, Vital’s cash payout ratio was 89% in the quarter. This is a significant improvement from the 99% payout level of two years ago. Looking ahead, Vital’s balance sheet and payout ratio will continue to improve as the company continues with dispositions and debt management.
The company’s goal is to improve its capital structure and balance sheet. Vital recently redeemed a 6.25% debenture, and replaced it with a 4.8% debenture. This is just one example of Vital’s efforts. These efforts help improve its debt position, its earnings, and its balance sheet.
Vital’s debt-to-book value is currently 49%. This is an improvement compared to the 52% level last year. Additionally, its debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio of 8.5 times falls well within Vital’s target range of eight to nine times.
Catalysts for Vital
Vital Infrastructure’s stock price has also been under pressure because of its Australian tenant, Healthscope, which went into receivership. This caused uncertainty about possible write-downs and financial implications to Vital. However, an agreement with Cavalry Healthcare was reached in September, whereby Cavalry is effectively taking over the leases. As things settle, this should be a positive catalyst for the stock, as this removes a lot of uncertainty.
Another issue that’s been pressuring Vital’s stock is the economic problems in Brazil. High debt and high interest rates have led to investor worry about Vital’s Brazilian private healthcare assets. But Vital Infrastructure’s Brazilian portfolio is quite profitable, and 100% leased and inflation-linked.
The bottom line
Vital Infrastructure’s stock has taken a hit recently as it remains a transformation story with some lingering uncertainty. I’m focused on the fact that these real estate assets are some of the more stable and predictable assets in real estate. This monthly dividend stock is yielding 7.6% and is worth considering for your TFSA.
