Monthly paying dividend stocks with attractive yields can help you earn a passive-income stream. As shareholders receive a monthly payout, the dividends can be used to offset expenses such as utility bills.
However, investors should note that dividends are not guaranteed and can be reduced or suspended entirely if economic conditions deteriorate. For instance, several TSX oil companies suspended dividend payouts when oil prices declined rapidly three years back.
But dividends are paid by companies that generate consistent profits and stable cash flows. Moreover, dividend stocks have historically outpaced broader indices over time, as investors can also benefit from capital gains.
Here is one such TSX stock with a 10% dividend yield and a monthly payout.
NorthWest Healthcare Properties REIT
A real estate investment trust (REIT), NorthWest Healthcare (TSX:NWH.UN), currently pays investors a monthly dividend of $0.067 per share, translating to a forward yield of 10.4%. With a portfolio of 233 properties spanning 18.6 million square feet, NorthWest Healthcare REIT offers you exposure to a recession-resistant sector.
Around 83% of NorthWest’s rents are indexed to inflation, and 80% of its tenants are supported by government funding. With 2,100 tenants across eight countries, NorthWest Healthcare is well diversified. It ended the first quarter (Q1) with an occupancy rate of 97% and a weighted average lease expiry of 13.8 years, providing investors with significant cash flow visibility.
The company’s global scale makes it a partner of choice for leading operators. It completed $1.1 billion of global acquisitions in 2022 and entered the U.S. market, which is the largest healthcare market globally.
NorthWest Healthcare aims to provide sustainable and growing cash distributions by expanding its real estate portfolio. It already owns and operates properties in North America, Brazil, Europe, Australia, and New Zealand.
It is focused on growth opportunities within the existing portfolio and via accretive acquisitions in target markets, allowing the REIT to expand its assets base and maximize shareholder value.
After a difficult year in 2022, NorthWest Healthcare expects to increase adjusted funds flow from operations by 10% in 2023. It has also identified $220 million of non-core assets, which would be offloaded this year, providing it with additional flexibility.
What’s next for NorthWest Healthcare REIT and investors?
A period of rising interest rates will act as a headwind for NorthWest REIT and its peers. Typically, REITs use leverage to fund their acquisitions. As the cost of debt has increased significantly, NorthWest’s mortgage and loan interest expense has risen to over $51 million in Q1 of 2023, up from $23.38 million in the year-ago period.
But NorthWest emphasized, “The REIT has entered $892 million of hedging arrangements to fix interest rates on floating rate, foreign currency debt facilities which will immediately stabilize results and increase AFFO by $0.03 to $0.05 per unit.” It also refinanced $1.7 billion of expiring debt and increased fixed-rate exposure to 63% of total debt.
The Canadian REIT has underperformed broader markets in the past decade. Since June 2013, NorthWest Healthcare has returned just 30% to shareholders after adjusting for dividends. The TSX Index has surged 120% in this period.
Down 47% from all-time highs, NorthWest Healthcare stock is currently trading at a discount of 38.5% to consensus price target estimates.
