Actual property shares in Canada have been on a tough experience these days. Greater rates of interest, inflation worries, and slowing housing markets have spooked traders. Some have rushed for the exits. However for these keen to look somewhat deeper, this might be a golden alternative, particularly in actual property funding trusts (REITs) that target sectors constructed for stability.
One of many smartest locations to place your cash proper now might be NorthWest Healthcare Properties REIT (TSX:NWH.UN). This REIT isn’t tied to purchasing malls or downtown workplace towers. As a substitute, it owns and manages healthcare actual property — suppose hospitals, medical clinics, and physician places of work. That offers it a little bit of a moat, as a result of healthcare doesn’t cease when the financial system slows down.
Why NorthWest works
NorthWest’s portfolio consists of 171 income-producing properties throughout Canada, Europe, Brazil, Australia, and New Zealand. These aren’t short-term leases, both. Most of its tenants are healthcare suppliers on long-term agreements. Meaning regular revenue, decrease turnover, and extra predictable money move for traders.
So, how has NorthWest been doing these days? In its most up-to-date earnings report for the primary quarter of 2025, the REIT reported income from funding properties of $111.6 million. That’s a drop of 16.4% from the identical time final yr, however there’s context behind the quantity. The REIT bought off some non-core properties, which introduced in one-time money however lowered top-line income.
Once you strip out these gross sales, the core enterprise seems to be stronger. Similar property web working revenue (SPNOI) really elevated by 4.5%, climbing to $73.8 million. That reveals development the place it counts. And geographically, the energy was unfold throughout all areas, together with Canada, Australia, and Brazil.
Money is king
On the leasing entrance, issues additionally look wholesome. NorthWest accomplished 280,000 sq. toes of leasing exercise within the quarter, with a stable 89% renewal charge. That tells us tenants wish to keep put, an incredible signal for revenue stability going ahead.
Now let’s speak dividends, as a result of that’s seemingly what caught your consideration within the first place. NorthWest at the moment pays an annual dividend of $0.36 per unit. At at present’s worth of round $4.82, that provides traders a yield of seven.5%. That’s properly above common, particularly for a REIT that isn’t in a high-risk sector.
Even higher, the dividend seems to be extra sustainable than it used to. The REIT reported adjusted funds from operations (AFFO) of $0.10 per unit in Q1 2025, up from $0.09 a yr in the past. Its payout ratio additionally improved, from 105% right down to 92%. Whereas nonetheless a contact excessive, the course is encouraging. A payout ratio below 100% means the corporate is producing sufficient money to cowl the dividend. And the truth that it’s heading decrease is a optimistic pattern for future stability.
Trying forward
Behind the scenes, NorthWest has been tightening up its stability sheet. In Q1, it accomplished $260 million in asset gross sales, together with a significant sale of shares in Assura PLC price $209 million. That deal alone generated a achieve of $32.3 million, which was used to pay down debt. Leverage dropped to 50.4% on the finish of the quarter, and has since fallen to 48.6%. That’s an excellent transfer in a high-rate atmosphere.
For traders with a long-term mindset, this issues. Much less debt means decrease danger, extra monetary flexibility, and probably stronger returns. And in contrast to workplace or retail REITs, healthcare REITs are typically extra insulated from financial cycles. Individuals get sick whether or not or not rates of interest go up.
Over time, because the REIT continues to wash up its stability sheet and the market regains confidence in actual property, the inventory might rebound. That might add capital good points on prime of your revenue. And because the items are inexpensive, it’s simple so as to add extra as you go.
Backside line
NorthWest Healthcare Properties REIT isn’t a flashy inventory. However it doesn’t have to be. It’s constructed for long-term traders who wish to earn passive revenue from a secure, world, and rising sector. The dividend is powerful, the enterprise mannequin is regular, and the value is true.
