It's hard to tell which direction the stock market is going. One day it's up 200 points, and the next -- well, who knows? If you're looking for a good place to park your funds at a rate that better keeps up with inflation, Medical Properties Trust (MPW +2.17%), Physicians Realty Trust (DOC +0.00%) and GlaxoSmithKline (GSK 0.26%) are healthcare stocks that all offer dividend yields of 5% or more.
All three are down so far this year, providing an opportunity get in now on solid companies that will pay you (in dividends) to be patient while you wait for their shares to bounce back. All three are profitable, and based on price-to-earnings (P/E) ratio and other measures, they appear to be bargains for the moment.
Medical Properties has solid growth in store
Medical Properties Trust's shares are down more than 30% so far this year. The company is a real estate investment trust (REIT) that is one of the world's largest owners of hospitals, with 46,000 beds spread across 440 facilities in nine countries and four continents.
NYSE: MPW
Key Data Points
The company reported its second-quarter earnings on Aug. 3. It posted funds from operations (FFO) of $275 million, or $0.46 per share, up from $251 million of FFO and $0.43 per share in the same period last year. It also saw revenue rise 4.8% year over year to $400.2 million. Looking ahead, the company maintained its full-year FFO guidance of between $1.78 and $1.82 per share.
Medical Properties is also building a dividend track record. The REIT raised its quarterly dividend by 4% this year to $0.29 per share, the ninth consecutive year it increased its dividend. That gives the shares a current yield of around 6.94%. Its FFO payout ratio is 63%, which is quite safe for a REIT with dependable free cash flow such as Medical Properties. Its tenants have an average remaining time of 17.8 years on their leases. T
It's been quite a run for Medical Properties Trust. The company has increased annual FFO by 881% over the past decade, showing it should have no problem to continue paying and raising dividends. And based on its price-to-FFO ratio of 6.9 over the trailing 12 months, the stock currently has a very reasonable price for a REIT.
GlaxoSmithKline looks to rebound
Pharmaceutical giant GlaxoSmithKline has seen its shares fall by more than 22% this year. Investors were concerned about the impact of 3,000 personal injury lawsuits regarding former GSK heartburn drug Zantac, which was pulled from shelves by regulators in 2020 because of cancer concerns. However, the the plaintiff in the first Zantac lawsuit recently agreed to drop his case -- leading Glaxo to believe that the threat of Zantac lawsuits may be overblown. It certainly merits watching.
NYSE: GSK
Key Data Points
Another factor possibly weighing on the stock's price may be the uncertainty surrounding the company's spinoff of its consumer healthcare division, which was completed on July 18. The new entity trades under the name Haleon. The spinoff means less revenue for GSK, but it also likely means higher profit margins from its other segments (specialty medicines, vaccines, and general medicines).
In the second quarter -- its first since the completion of the spinoff -- the company reported $8.34 billion in revenue, up 13%, year over year, with EPS growth of 6% versus the same period last year. GSK also said adjusted operating profit margin rose 7%.
The company boosted its guidance for 2022, saying it expects sales to grow between 6% and 8% (up from the previous range of 5% to 7%) and adjusted operating profit to rise between 13% and 15%, compared to earlier projections of 12% to 14%.
Then there's GSK's quarterly dividend, which it cut this year from $0.63 to $0.341 because of the impending spinoff, but still offers a yield of 7.16%, with a dividend payout ratio of 43%. This leaves the company plenty of room to continue raising the dividend, particularly if its revenue projections are correct. With a trailing 12-month P/E ratio of 14, its shares are priced below those of other major pharmaceutical companies.
Physicians Realty Trust remains dependable
Physicians Realty Trust is a REIT that specializes in medical office buildings. As of June 30, it owned 289 such buildings, with 94.9% of them leased. The company's stock has taken less of a hit than the other two mentioned, with shares down a little more than 3% this year.
NYSE: DOC
Key Data Points
The REIT reported second-quarter earnings on Aug. 4. Revenue came in at $132.2 million, up 17% year over year, while FFO was $0.27 per share compared to $0.26 per share in the same period last year.
The company has kept its dividend at $0.23 per quarter since 2017, but even without an increase in five years, its yield works out to 5.08%. Because the dividend has held steady while the company's FFO has risen, the company's payout ratio stands at 85%, which is within the safety range for a REIT. Its trailing P/FFO ratio, is 9.8 -- slightly higher than Medical Properties Trust's P/FFO ratio of 6.9, but still a bargain.
Not an easy choice
All three stocks are solid picks. Healthcare-related stocks tend to be more recession-proof than other industries. Even in hard times, there's a limit to what people will cut back on when it comes to healthcare -- and our aging population points to the need for more medical care.
The companies offer safe dividends and are on solid enough ground that their shares should easily bounce back whenever the markets do. GlaxoSmithKline, despite potential Zantac lawsuits, is probably the safest of the three because it isn't likely to cut its dividend again and now that its consumer healthcare division has been spun off, its profit margins should widen.
Between the two medical REITs, Medical Properties Trust is more underpriced than Physicians Realty Trust, and it is more likely to increase its dividend.
