How can we, as investors, protect ourselves from the many risks and uncertainties in the economic and political world? Well, the answer lies in where you focus your investments. In bad times, invest in companies that provide an essential service or product. Like the two recession-resistant Real Estate Investment Trusts (REITs) I will discuss in this article.
These REITS not only provide investors exposure to defensive, economically insensitive businesses, but also to steady income. Let’s take a look.
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One of the biggest secular trends today
The population is aging. This is a trend that has been happening for years now, and with each passing year, it gets stronger and stronger. In fact, here are some statistics to really get a clear idea of what we’re dealing with.
Canada’s oldest baby boomers turn 80 next year. By 2040, nearly 25% of the population will be a senior (65+ years old). This means a lot of things. For example, it means that demands on the healthcare system will continue to rise.
Let’s discuss two REITs that will benefit from this aging population trend. These REITS are in the right place at the right time – they’re recession-resistant and they’re steady income generators. Just what investors need right now.
Chartwell Retirement Residences
Chartwell Retirement Residences (TSX:CSH.UN) has been flying recently. Up more than 100% since the end of 2022, this recession-resistant REIT is benefitting from strong demand. This is evident in recent occupancy trends, which have been steadily rising. In fact, they have risen from 85.7% in December 2023 to 90% in Q4 2024 and 91.4% in February 2025.
The simple fact is that many of Canada’s seniors will either want or need to move into one of Chartwell’s Residences one day. And with their numbers rapidly rising, this means a bigger target market for Chartwell.
Chartwell is currently yielding a very respectable 3.7%. This dividend is backed by the consistency of the business as well as its strong long-term outlook. Recent results reflect this. In the fourth quarter of 2024, Chartwell’s revenue increased 21% to $38 million and its cash flow from operations increased 47% to $58 million. Finally, the company’s margins are increasing rapidly. In fact, its operating margin increased 150 basis points to 37.2% as expenses fell.
Northwest Healthcare Properties REIT
Northwest Healthcare Properties REIT (TSX:NWH.UN) own and operates healthcare properties such as medical office buildings, hospitals, and clinics. With a dividend yield of 7%, and a recession-resistant business that’s benefitting from the aging population, Northwest is a good bet for steady income.
But this REIT has not been immune to problems. An aggressive acquisition strategy led to unsustainably high debt levels and ultimately a dividend cut that sent the stock spiralling downward. Today, Northwest has righted its wrongs through divestitures and debt restructuring and it stands ready to benefit from its strong business fundamentals.
Beyond its exposure to the aging population trend, Northwest also has other highly desirable qualities that make it a top REIT for steady income. Most notably, its assets are characterized by long-leases and they’re inflation-indexed. This makes the cash flow profile of these assets quite stable and predictable. In Northwest’s case, its weighted average lease expiry is currently 13.6 years, its occupancy rate is 96%, and 84% of the leases are subject to rent indexation.
The bottom line
In conclusion, these defensive REITs make good additions to investor portfolios to make them more recession-resistant with steady dividend income.
