6.5% Yield: Is NorthWest REIT’s Dividend Safe?

When you’re judging dividend safety, ignore the yield first and follow the cash. A “safe” dividend comes from recurring cash flow that covers the payout after interest costs and routine capital spending. For real estate investment trusts (REIT), that usually means watching adjusted funds from operations (AFFO) per unit and the payout ratio, plus the balance sheet. If debt maturities bunch up or refinancing costs jump, a dividend that looked fine on paper can suddenly feel tight. You also want to know if the payout depends on asset sales or one-off gains, because those do not repeat on schedule. So let’s look at whether this dividend stock checks those boxes.

NWH

NorthWest Healthcare Properties REIT (TSX:NWH.UN) looks different from most REITs as it focuses on healthcare real estate across several regions, including North America, Europe, Australasia, and Brazil. It owns hospitals, clinics, and other healthcare facilities, then collects rent under long leases. That model can feel defensive, because healthcare services do not disappear in a downturn. The trade-off is complexity, since currencies, regulations, and capital markets all matter when you operate globally.

The recent performance story starts with the fact that this REIT has already been through pain. The distribution used to be higher, then it was cut in 2023, and the monthly amount has stayed at $0.03 per unit since. That history shows management will protect the balance sheet if coverage gets strained. It also means today’s 6.5% yield reflects a reset payout level, not an old payout the market doubts.

Into earnings

The latest earnings data gives you a clearer lens than the chart. In Q3 2025, NorthWest reported revenue from investment properties of $104.3 million, and same-property net operating income rose 4.4% year over year to $76.9 million. Those numbers show the portfolio still grows rent on existing assets, even while the REIT sells properties and reshapes the footprint.

Most importantly for the dividend, AFFO per unit came in at $0.11 in Q3 2025, up from $0.10 in Q2 2025 and $0.09 in Q3 2024. That pushed the AFFO payout ratio down to 85%, improved from 88% the quarter before and 99% a year earlier. An 85% payout ratio is not ultra-conservative, but it is a lot more comfortable than “basically everything we earned.”

Operational stats also looked supportive. Management commentary around the quarter pointed to portfolio occupancy around the high-90% range and long lease terms, with strong tenant retention on renewals. Stable occupancy and long leases make cash flow more predictable, which is what you want when you rely on a monthly payout.

Bottom line

So, is NorthWest’s dividend safe right now? It looks safer than it did a year ago, as AFFO per unit has risen and the AFFO payout ratio improved to about 85% in the latest quarter. Right now, here’s what that dividend could still earn per year from $7,000.

COMPANYRECENT PRICENUMBER OF SHARESANNUAL DIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENTNWH.UN$5.571,256$0.36$452.16Monthly$6,995.92

But “safe” is not the same as “bulletproof.” The REIT already showed it will cut if needed, and the story still depends on keeping refinancing manageable and continuing to execute its portfolio strategy. If you buy it today, treat the 6.5% yield as appealing but not guaranteed, and keep an eye on AFFO coverage and debt progress each quarter.

The post 6.5% Yield: Is NorthWest REIT’s Dividend Safe? appeared first on The Motley Fool Canada.

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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool has a disclosure policy.