I love to invest in real estate investment trusts (REITs). These entities generate lots of passive income and tend to deliver attractive total returns (dividend income plus capital gains). I hold several REITs in my portfolio.

My largest REIT holding by far is Medical Properties Trust (MPW -2.90%). I started buying shares of the healthcare REIT in 2007 and have steadily added to my position over the years. I purchased additional shares earlier this year and recently added even more. Here's why I can't seem to get enough of this high-yielding REIT.

A bigger dose of passive income

Shares of Medical Properties Trust have been under a lot of pressure this year. They've fallen more than 35% from their peak, weighed down by the interest rate-inspired sell-off in the REIT sector. Shares of REITs typically decline when the Federal Reserve raises interest rates to compensate investors for their higher risk profile compared to other income-producing vehicles, such as bonds and bank CDs. Medical Properties' dividend yield has risen from around 5% to more than 7% this year. 

I took advantage of this expansion by purchasing more shares to lock in a higher income yield. I now own 550 shares of Medical Properties Trust. At the company's current dividend payment of $0.29 per share each quarter, I should receive $638 of annual passive income from this investment. That's a bit more than the roughly $500 of passive income I collected from this REIT last year

Why I can't get enough of this REIT

There are three reasons I continue adding to my position in Medical Properties Trust. First, it pays an attractive, well-supported dividend. The REIT generates very stable rental income by leasing hospitals it owns to operators under long-term net lease agreements. These contracts make the tenant responsible for maintenance, real estate taxes, and building insurance, insulating the REIT from those rising and volatile costs. Meanwhile, the REIT pays out a relatively conservative amount of that income to support its high-yielding dividend. Last year, it had a dividend payout ratio of around 80% of its adjusted funds from operations (AFFO), a healthy level for a REIT. Finally, while Medical Properties Trust doesn't have an investment-grade credit rating, it does have a solid balance sheet with a reasonable leverage ratio. These factors all help put the dividend on a solid foundation.

Meanwhile, the REIT has done an excellent job growing its portfolio, AFFO per share, and dividend over the years. It notched its ninth consecutive annual dividend increase in 2022. Driving that growth has been its ability to make highly accretive hospital acquisitions that have helped grow its AFFO per share. Last year, it completed $3.9 billion of investments, which helped support double-digit AFFO per share growth, enabling the REIT to increase its dividend by 4% while lowering its payout ratio. 

Finally, the REIT still has a lot of growth potential. It estimates that there's $500 billion to $750 billion of owner-occupied hospital real estate in the U.S. alone, giving it a vast pool of potential acquisitions. In addition, it sees a $260 billion U.S. market for behavioral healthcare facilities, a sector it expanded into last year. On top of that, the company has an equally large global opportunity to acquire hospitals and behavior healthcare facilities in its core international markets in the future.  

While the company's falling stock price and lower credit rating hinder funding new acquisitions, it still has other financing sources. For example, it's retaining more cash as its dividend payout ratio falls, giving it additional money to invest in acquisitions. Meanwhile, it sees the potential to complete additional joint venture transactions to fund new deals. It recently closed a deal to sell a stake in eight hospitals, receiving $1.3 billion to repay debt. The REIT believes that joint ventures and hospital sales could provide the capital to make $1 billion to $3 billion of accretive investments this year.

Too good to pass up

Shares of Medical Properties Trust have been under a lot of pressure this year because of rising interest rates. While those factors will affect the REIT's ability to access capital, it should still be able to find the money to continue expanding its portfolio and dividend. That's why I took further advantage of this year's sell-off to scoop up even more shares of this high-yielding REIT.