Investors in Medical Properties Trust (MPW -0.22%) might be feeling a bit sick lately as the market continues to beat down the share price of a company that's one of the largest private owners of hospitals in the world.
But if you have $774 to invest, you could do far worse than buying 50 shares of this real estate investment trust (REIT) that currently owns and lends to 440 facilities with 46,000 licensed beds in 10 countries.
That $774 figure comes from the $15.48 per share the stock was selling for at the time of this writing. Year to date, the stock is down about 35%, even worse than the S&P 500, but that collapse has helped drive its yield up to about 7.4%, compared to 1.7% for that major index.
And its long history as an income stock with a strong total return drives much of the argument for buying and holding shares in the REIT. Since going public at $10.50 a share in July 2005, this stock has returned 399% compared with 345% for the S&P 500. The chart below shows what that looks like as a $10,000 investment made at its initial public offering and held until now.
But what have you done for me lately?
Not much, if you're just looking at the share price. Even looking back three years, back past its current troubles, the stock is a laggard, down 16% since July 2019, while the benchmark Vanguard S&P 500 ETF is up about 26% during that same period.
Pandemic-induced concerns about big medical providers probably hindered its performance. But the stock did rally, only to fall precipitously lately over skepticism about the company's ability to meet its acquisition and capitalization goals because of rising interest rates and the cost of capital.
That led to a nearly 18% slump in June alone as doubts grew about Medical Properties' ability to continue growing at a pace that has seen assets more than double since 2018.
Headwinds, meet tailwinds
But just as there are headwinds, there are tailwinds, too, not the least of which is a growing customer base. Just before the pandemic began, Americans over age 65 comprised 16% of the population, and that's expected to grow to 21% by 2046. Meanwhile, the number of hospital beds in the United States has fallen from more than 1.6 million in 1960 to about 900,000 today.
A lot of that shrinkage is due to something we all see: shorter and fewer hospitalizations in favor of outpatient care. Medical Properties Trust is positioning itself to profit from that trend, too. Its current portfolio is valued at about $22.2 billion, of which about 72% are general acute-care hospitals. The rest are a mix of behavioral health, inpatient rehab, long-term acute-care hospitals, and freestanding urgent-care facilities.
The company has 53 operators of those properties, with the largest only accounting for less than 3% of the total portfolio. Geographic diversity also is in play here. About 60% of those assets are scattered among 32 states, with another 20% in the United Kingdom, and 4% to 6% each in Switzerland, Germany, and Australia.
Growing the portfolio and the ability to juice returns
Medical Properties Trust is continuing to grow its portfolio, nonetheless, adding four hospitals in Finland during the first quarter while reiterating plans to invest $1 billion to $3 billion by year's end. And it continues to grow its payout, raising the dividend for 10 years in a row when it bumped the payout by 4% earlier this year.
Funds from operations also remain strong, growing 12% year over year in the first quarter with guidance for similar performance through 2022. That, and a payout ratio of about 69% based on cash flow, make the solid dividend performance look sustainable, even if any optimism about profit and dividend growth should be tempered by what a recession could bring.
Thros in a yield that should warm the hearts and line the pockets of dividend investors continue to make Medical Properties Trust a good investment to consider now even with the uncertainty it faces.
