Medical Properties Trust (MPW -7.69%) could be a prescription for what's ailing pretty much everyone's portfolio right now. Shareholders of this real estate investment trust (REIT) have enjoyed long-term growth that bests the overall market, and the short-term pain so far this year has been minimal as well.
Shares in this Birmingham, Alabama-based health-care real estate investment leader have only fallen about 4% in January, compared with about 9% for the S&P 500, not to mention the precipitous plunges of many a go-go growth stock.
Strong metrics also include a nearly 14% year-over-year increase in funds from operations (FFO), a critical measure of a REIT's performance. Medical Properties Trust has also raised its dividend for nine straight years and is now yielding almost 5% with a dividend payout ratio of 82.51%, which is quite reasonable for a REIT.
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This REIT's long-term performance is even more calming for the nerves in a shaky market. Go back five years and look at total return, and the story's the same: a 141.7% gain for Medical Properties Trust compared with 112.8% for the S&P 500. Take it back even further, and $10,000 invested at the company's IPO in 2005 would now be worth $70,400, compared with $51,070 for the S&P 500.
More than 444 facilities, 50 operators, in a critical business
Medical Properties Trust is one of the world's largest owners of hospitals, with a portfolio comprising more than 444 facilities with about 46,000 licensed beds in 32 states and eight other countries; 60.1% of its capital allocation is domestic, followed by 19.7% in the U.K., 5.8% in Germany, 5.6% in Switzerland, and 4.6% in Australia, and the rest scattered among four other nations.
About 72% of its holdings are general acute-care hospitals, followed by about 10% each in behavioral health and inpatient rehabilitation facilities, with the rest spread among long-term care and urgent-care centers and other related businesses.
The coronavirus pandemic's effect on facility operators has wreaked havoc on some health-care REITs, but Medical Properties Trust is protecting itself -- and shareholders, too -- by diversifying its holdings among more than 50 operators, with its single-largest property representing only 3% of its total portfolio.
The company says its business model facilitates acquisitions and recapitalizations that empower its client-operators to leverage the value of their real estate assets to invest in their own businesses through facility improvements and technology upgrades.
That helps those operators keep current and compete while bolstering the REIT's bottom line with steady payments. It's hard to imagine a more essential business than this. Through pandemic and inflation, health-care facilities will continue to generate huge income flows, guaranteed in large part by public and private insurance.
Investing in itself and the future points to a sound strategy
Medical Properties Trust also continues to boost its future revenue stream by investing in itself. It executed sales-leaseback transactions worth more than $1.6 billion in the third quarter for 18 behavioral health facilities with a Kentucky-based operator and five general acute-care hospitals in South Florida leased to Texas-based Steward Health Care System.
Investors are following the long-proven path of staking a claim in well-run companies in essential markets and then hanging on as long as the fundamentals remain solid. They are in this case. Medical Properties Trust remains a solid choice for passive income even in the most active of times.
The money that has exited the market will return, but I wouldn't look at Medical Properties Trust as one of those growth stocks that will rally as sharply as it fell. It didn't fall that much to start. It probably won't rise that fast, either.
Instead, this is the kind of well-run company in an essential business that continues to make money, and with the REIT structure, it's obligated to pass along at least 90% of its taxable income to shareholders. That's in the form of dividends, of course.
Stability at the top is another attribute for a company expected by investors to stay the course through rough seas. In this case, Medical Properties Trust is still headed by co-founder Edward Aldag, who also is chairman, president, and chief executive officer.
"Our shareholders should expect nothing different from us going forward, and we have never felt better about our range of attractive capital options and investment opportunities than we do today," he said in his company's third-quarter 2021 earnings report
