Printed on March sixteenth, 2023 by Aristofanis Papadatos
NorthWest Healthcare Properties Actual Property Funding Belief (NWHUF) has three interesting funding traits:
#1: It’s a REIT so it has a good tax construction and pays out nearly all of its earnings as dividends.
Associated: Checklist of publicly traded REITs
#2: It’s a high-yield inventory based mostly on its 9.2% dividend yield.
Associated: Checklist of 5%+ yielding shares
#3: It pays dividends month-to-month as a substitute of quarterly.
Associated: Checklist of month-to-month dividend shares
You possibly can obtain our full Excel spreadsheet of all month-to-month dividend shares (together with metrics that matter like dividend yield and payout ratio) by clicking on the hyperlink beneath:
NorthWest Healthcare Properties Actual Property Funding Belief’s trifecta of favorable tax standing as a REIT, a excessive dividend yield, and a month-to-month dividend make it interesting to particular person traders.
However there’s extra to the corporate than simply these components. Hold studying this text to study extra about NorthWest Healthcare Properties Actual Property Funding Belief.
Enterprise Overview
NorthWest Healthcare Properties Actual Property Funding Belief is an open-ended actual property funding belief with a portfolio of high-quality worldwide healthcare actual property infrastructure comprised of pursuits in a portfolio of 232 income-producing properties and 18.5 million sq. toes of gross leasable space situated all through main markets in Canada, Brazil, Europe, Australia and New Zealand.
Supply: Investor Presentation
The REIT’s portfolio of medical workplace buildings, clinics and hospitals is characterised by long run listed leases and steady occupancies. With a completely built-in and aligned senior administration crew, the REIT leverages over 200 professionals throughout 9 places of work in 5 international locations to function a long-term actual property accomplice to main healthcare operators.
NorthWest Healthcare Properties REIT has a excessive occupancy charge of 97.0% and a weighted common lease period of about 14 years. The lengthy period of leases affords nice visibility in future money flows. The REIT can also be extremely diversified geographically and, extra importantly, it’s considerably protected against excessive inflation due to contractual hire progress 12 months after 12 months.
Because of the important nature of the healthcare trade, NorthWest Healthcare Properties REIT has proved markedly resilient all through the coronavirus disaster, in sharp distinction to many different REITs. The belief grew its adjusted funds from operations (FFO) per unit by 3% in 2020 and by one other 5% in 2021 whereas it additionally stored its dividend flat.
Alternatively, NorthWest Healthcare Properties REIT has decelerated recently. Within the third quarter of 2022, it grew its income and its internet working earnings by 21% and 20%, respectively, over the prior 12 months’s quarter however its adjusted FFO per unit decreased 29%, from $0.21 to $0.15, primarily because of decrease transaction volumes and elevated curiosity expense. The latter resulted from the aggressive rate of interest hikes carried out by the Fed in an effort to revive inflation to wholesome ranges. As rates of interest usually are not prone to lower anytime quickly, they’re prone to proceed to take their toll on the underside line of NorthWest Healthcare Properties REIT within the upcoming quarters.
Development Prospects
The healthcare actual property market has many engaging traits. Initially, it is likely one of the largest industries on this planet, accounting for greater than 10% of worldwide GDP. About $8 trillion is spent on world healthcare yearly. As well as, healthcare spending is rising at a 4%-7% annual charge.
Supply: Investor Presentation
Furthermore, the healthcare trade enjoys favorable demographics due to a rising and ageing world inhabitants. Because the 65+ group repeatedly grows and it’s the group with the best spending energy, world healthcare spending is prone to proceed rising at a quick tempo for the subsequent a number of years.
Moreover, NorthWest Healthcare Properties REIT has constructed a quickly rising asset administration platform. Because of this platform, the belief enjoys fast-growing administration charges. Whereas administration charges considerably cooled within the newest quarter, they’re prone to stay a cloth progress driver within the upcoming years.
Total, NorthWest Healthcare Properties REIT has ample room for future progress due to the secular progress of the healthcare trade. Alternatively, excessive rates of interest are prone to take their toll on the underside line of the belief within the upcoming quarters.
NorthWest Healthcare Properties REIT has grown its FFO per unit by 1.6% per 12 months on common over the subsequent 5 years. Given the above components, we anticipate the REIT to develop its FFO per unit by about 2.0% per 12 months on common over the subsequent 5 years, roughly in step with its historic progress charge.
Dividend & Valuation Evaluation
NorthWest Healthcare Properties REIT is at present providing a 9.2% dividend yield. It’s thus an fascinating candidate for income-oriented traders, however the latter ought to be conscious that the dividend could fluctuate considerably over time as a result of gyrations of the change charges between the Canadian greenback and different foreign currency echange and the USD.
Furthermore, the REIT has an elevated payout ratio of 84%, which enormously reduces the margin of security of the dividend. On the intense facet, due to its stable enterprise mannequin and its sturdy curiosity protection of 6.1, the belief will not be prone to minimize its dividend within the absence of a extreme recession. Nonetheless, traders shouldn’t anticipate significant dividend progress going ahead and ought to be conscious that the dividend could also be minimize within the occasion of an unexpected downturn, equivalent to a deep recession.
We additionally word that NorthWest Healthcare Properties has a excessive debt load. Its internet debt is at present standing at $2.7 billion, which is almost double the market capitalization of the inventory. The excessive payout ratio and the excessive debt load of the REIT considerably scale back its resilience to a possible future recession.
In reference to the valuation, NorthWest Healthcare Properties REIT is at present buying and selling for under 9.8 occasions its FFO per unit within the final 12 months. A budget valuation has resulted primarily from the anticipated impression of upper curiosity expense on the underside line and the impact of excessive inflation on the valuation, as excessive inflation enormously reduces the current worth of future money flows.
Given the fabric debt load of the REIT, we assume a good price-to-FFO ratio of 11.0 for the inventory. Subsequently, the present FFO a number of is decrease than our assumed honest price-to-FFO ratio. If the inventory trades at its honest valuation degree in 5 years, it is going to get pleasure from a 2.4% annualized acquire in its returns.
Considering the two% annual FFO-per-unit progress, the 9.2% dividend, and a 2.4% annualized growth of valuation degree, NorthWest Healthcare Properties REIT may supply an 11.4% common annual complete return over the subsequent 5 years. That is a lovely anticipated return, particularly for the traders who anticipate inflation to subside swiftly to its regular ranges. Nonetheless, the inventory is appropriate just for the traders who’re comfy with the danger that comes from the fabric debt load of the belief.
Ultimate Ideas
NorthWest Healthcare Properties REIT has the benefit of working belongings within the world healthcare trade, which enjoys sturdy and dependable secular progress. Regardless of its excessive payout ratio of 84%, the inventory is providing an exceptionally excessive dividend yield of 9.2% and therefore it’s a lovely candidate for the portfolios of income-oriented traders, notably on condition that the inventory has a lovely anticipated return of 11.4% per 12 months over the subsequent 5 years.
Alternatively, traders ought to concentrate on the danger that outcomes from the weak stability sheet of the REIT. If excessive inflation persists for for much longer than at present anticipated, excessive rates of interest will enormously burden the REIT. Subsequently, solely the traders who’re assured that inflation will quickly revert to regular ranges ought to contemplate buying this inventory.
Furthermore, NorthWest Healthcare Properties REIT is characterised by exceptionally low buying and selling quantity. Which means it’s laborious to ascertain or promote a big place on this inventory.
If you’re eager about discovering extra high-quality dividend progress shares appropriate for long-term funding, the next Positive Dividend databases will likely be helpful:
The most important home inventory market indices are one other stable useful resource for locating funding concepts. Positive Dividend compiles the next inventory market databases and updates them month-to-month:
Thanks for studying this text. Please ship any suggestions, corrections, or inquiries to [email protected].
Thanks for studying this text. Please ship any suggestions, corrections, or inquiries to [email protected].
