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MARKETS LIVE BLOG:

STOCKS RISE, LED BY STELLAR ALPHABET, MICROSOFT EARNINGS

Latest stubborn U.S. inflation reading will bring about more 'wait and see' from the Fed

Have $500? Buy This 6.3%-Yielding REIT in a Retirement Portfolio Today

Brian Paradza, CFA
·4 min read

Written by Brian Paradza, CFA at The Motley Fool Canada

Risks of sorts and kinds have emerged in 2022. A war in Europe has led to downward revisions to global economic growth amid resurgent COVID-19 pandemic scares, an energy crisis, and a tough global fight against rising inflation. Investing in real estate could provide shelter, and real estate investment trusts (REITs) may add a good layer of returns to a retirement portfolio during a potential bear market ahead.

Times may be tumultuous today, but fears of a bear market today should ideally not detract individuals from continuing to save and invest for the beautiful days in retirement. Thus, those monthly, quarterly, or annual contributions to a retirement portfolio should go ahead as initially planned and enable you to take advantage of cheap stocks during market crashes.

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Real estate has historically offered good capital protection during inflationary periods and recessions. Actually, due to their monthly distributions, REITs can boost a retirement portfolio’s income and help you avoid selling stocks at beaten-down prices during a down market.

Investors wishing to deploy new capital into the market today may wish to check out this defensive REIT that touts a juicy 6.3% yield and potentially strong capital gains today.

NorthWest Healthcare Properties REIT

NorthWest Healthcare Properties (TSX:NWH.UN) is one of the most promising and defensive REITs to buy and hold during a potential bear market in 2022.

The trust owns and manages a $10 billion portfolio of 229 healthcare properties distributed across Canada, the United States, the U.K., Europe, Brazil, Australia, and New Zealand. It boasts of a high 97% occupancy rate in a portfolio with extremely long-term tenant contracts that averaged over 14 years by March this year.

About 80% of NWH.UN’s revenue is indexed to inflation to protect returns against purchasing-power losses.

NorthWest Healthcare REIT reported a strong 9.2% year-over-year increase in net operating income for the first quarter of 2022. Income gains were aided by a 2.2% growth in same-property net operating income. Trust income growth should remain strong this year after the recent closing of a $753 million U.S. acquisition in April, and an internal development pipeline that powers organic growth.

Most noteworthy, the REIT is transitioning into an asset-light fund manager. New joint-venture (JV) agreements in the U.K. and in the United States could increase available capital under management from $11.2 billion to $14.5 billion this year.

Is NWH.UN stock a good stock to buy at its current valuation? The trust’s units are a bargain buy today considering they already trade below their most recent net asset value (NAV) of $14.73 per unit. Anticipated new joint-venture deals should increase the REIT’s adjusted funds from operations (AFFO) and NAV in 2022.

NWH.UN pays dividends every month. The current $0.067 per unit monthly dividend distribution yields a juicy 6.3% annually. An increased AFFO and NAV growth from upcoming JV deals will improve the security of the REIT’s distribution and unlock new capital gains.

Foolish bottom line

Spending $500 to add NorthWest Healthcare REIT’s units to a retirement portfolio could add a defensive, high-yielding stream of regular monthly dividend cash flows to the portfolio. Monthly proceeds could be reinvested or used to buy other favourite stocks and REITs during a down market and set you on a wealth growth path with compounding capital returns.

The post Have $500? Buy This 6.3%-Yielding REIT in a Retirement Portfolio Today appeared first on The Motley Fool Canada.

Should You Invest $1,000 In NorthWest Healthcare Properties?

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More reading

Fool contributor Brian Paradza has no positions in any stocks mentioned. The Motley Fool recommends NORTHWEST HEALTHCARE PPTYS REIT UNITS.

2022