We are all aware of the fact that one of the biggest demographic shifts is taking place, and with it comes lucrative opportunities for investment.
I am, of course, referring to the aging population, and as the baby boomers are now between the ages of 51 and 70, we continue to see healthcare and healthcare-related companies thrive.
According to census numbers, the percentage of Canadians that are above the age of 65 is fast approaching 20%. This number has been steadily rising, and just five years ago it was closer to 15%.
Two of the ramifications of this aging population are: (1) they need income-producing investments, and (2) industries that cater to this group, such as the healthcare and the long-term-care industry, will outperform.
NorthWest Health Prop Real Est Inv Trust (TSX:NWH.UN) is one such company, currently yielding 7%. It continues to see strong results from its growth strategy.
The company’s high-quality global, diversified portfolio of healthcare real estate properties located throughout Canada, Brazil, Germany, Australia, and New Zealand offers investors exposure to the growing market that addresses the aging population not only in Canada, but in selected countries worldwide.
Healthcare properties generally have stable occupancies and long-term leases, which make the underlying REIT a defensive one that is attractive for long-term investors.
Despite the defensive qualities of the REIT, it presents with a dividend yield that is higher than many of its REIT counterparts. This is primarily due to two factors. Firstly, it’s due to the company’s global expansion, which presents a higher risk/reward opportunity, and secondly, it’s due to the company’s recently reduced financial leverage to below 60%.
But, very importantly, the company’s payout ratio has come down significantly from highs of well over 100% to current levels in the 90% range.
The company was able to achieve this debt reduction in part via its $144 million equity issue, which increased the company’s shares outstanding by 14%. The uses of this cash are to lower the company’s debt balance and to fund future acquisitions.
With this issue, we also get a more liquid and larger market capitalization that will, as a result, be increasingly on the radar screens of investors, possibly creating more demand for the shares and upward price momentum.
In the second quarter of 2017, the company reported that the net operating income increased 3.2%, and funds from operations increased 6%.
With interests in 13 development projects as of the second quarter, and a focus on deleveraging the balance sheet, Northwest is looking at significant value creation over the next few years.
The shares are trading at $11.44, which is just above book value of $10.14 per share.