Charges are decrease. Financial dangers are increased. And customers and savers are strapped for money. Fortunately we now have dividend shares like Northwest Healthcare Properties REIT (TSX:NWH.UN). It’s yielding a really beneficiant 7.4%. It pays out month-to-month. And it’s fairly defensive.

Let’s discover.

Why this dividend inventory?

The jobless price got here in at 6.8% in November, an eight-year excessive and a trigger for concern. However what does this must do with Northwest Healthcare Properties? Nicely, rather a lot.

You see, Northwest is the proprietor and operator of a portfolio of medical workplace buildings and healthcare actual property. Which means that by definition, its enterprise shouldn’t be economically delicate. Demand for healthcare belongings is affected by the inhabitants’s healthcare wants. And that is one thing that Northwest has going for it.

Everyone knows that the inhabitants is getting old. It will drive demand for Northwest’s actual property as a result of as we become older, we require extra healthcare. In order that’s the primary level. Past this, the very nature of those belongings is that they’re characterised by long-leases and inflation-indexed. This makes the money stream profile of those belongings fairly secure and predictable. In Northwest’s case, the REIT’s weighted common lease expiry is presently 13.4 years, its occupancy price is 96%, and 84% of the leases are topic to lease indexation.

However Northwest has had its issues

Regardless of the defensive nature of Northwest’s belongings, the corporate did get into some hassle in its latest historical past. However this was a perform of an excessively aggressive acquisition technique. This was financed largely by way of debt, and when rates of interest began rising, Northwest was caught in a foul spot.

So, the corporate proceeded to chop its dividend (clearly not a very good factor), dump non-core holdings, and restructure its debt. Immediately, the REIT has emerged as a greater and stronger firm. For instance, its dividend is roofed by its money stream from operations.

Additionally, its leverage ratio was 43.6% on the finish of its newest quarter, in comparison with 47.7% within the prior 12 months. In truth, the corporate continues to pay down its debt, with a give attention to its costliest debt. The weighted common rate of interest on its debt as of September 30, 2024 was 5.6%, in comparison with 6.3% at December 31, 2023.

Lastly, there’s new administration in cost and their aim is to boost operational effectivity.

The underside line

I’d like to complete off by going again to the jobless, or unemployment price, that was introduced in the present day. An surroundings whereby customers are struggling is one thing we haven’t seen in a very long time. In truth, the patron has been the financial engine for fairly a while. If we’re seeing a reversal of shopper energy, we should look to the extra defensive shares for our portfolios.

Northwest Healthcare Properties is nicely positioned to climate the financial storm, and it’s trying increasingly more engaging once more because it cleans up its act. The eight-year excessive unemployment price helps drive dwelling the truth that we have to beef up on our defensive shares. A beneficiant and dependable month-to-month dividend earnings stream couldn’t come at a greater time. With a constant stream of month-to-month dividend funds, this dividend inventory can present its shareholders with that further money each month.