Two wrongs don't make a right. But one negative can lead to two positives -- at least when it comes to investing in dividend stocks.

What do I mean by that? When a dividend stock falls significantly (a definite negative), there are a couple of positive results. First, the dividend yield goes up. Second, the stock's valuation becomes more attractive. 

The current bear market has caused this scenario to happen with quite a few stocks. And if you're looking for an exceptionally high dividend yield of 10%, there's one dirt cheap stock that I think you'll especially want to check out.

A dividend investor's dream 

Medical Properties Trust (MPW -2.15%) (MPT) could be described as a dividend investor's dream. First of all, the company is organized as a real estate investment trust (REIT). That means that it's required to return at least 90% of taxable income to shareholders in the form of dividends.

Of course, a REIT doesn't have to pay dividends if it isn't profitable. However, MPT has been profitable since before its initial public offering in 2005. In the company's latest quarter, its earnings jumped nearly 30% year over year to close to $222 million. Normalized funds from operations also rose 3.4% to $272 million.

MPT owns and leases 435 hospital facilities with 44,000 licensed beds in 10 countries, including across 32 states in the U.S. The company's long-term leases require tenants to take responsibility for most of the property costs. Many of these leases have automatic inflation-linked annual increases built in.

The healthcare REIT has increased its dividend for eight consecutive years. Its dividend yield currently tops 10%. MPT's dividend payout ratio of 55% also indicates the ability to raise its dividend more in the future.

MPT's dividend yield has historically been attractive. But the stock's steep decline this year has pushed the yield to its highest level since 2009. This plunge has also given MPT a dirt cheap valuation with shares trading at only 6.2 times expected earnings and 0.78 times book value.

Too good to be true?

An impressive track record of profitability. Strong recent earnings growth. A solid business model that's largely inflation-proof. A growing dividend with a juicy yield. An attractive valuation. Is MPT too good to be true? Some might think so.

Roughly 17.5% of the stock float was sold short as of Oct. 14, 2022. This reflects considerable negativity about MPT.

Naysayers would point out that hospital operators continue to face a challenging environment. Costs have risen sharply. Rising interest rates make it more expensive to borrow. 

One of MPT's tenants, Pipeline, recently filed for Chapter 11 bankruptcy. The REIT's largest tenant, Steward, has experienced financial difficulties. This is potentially even more troubling because MPT owns a 9.9% equity stake in Steward. 

In addition to all of this, MPT's third-quarter earnings growth isn't as great as it seems. Much of the year-over-year increase stemmed from the sale of some facilities.

Context is key

All of the above statements are true. However, it's important to put them into context.

Yes, hospital operators face challenges. But the situation is improving and should continue to do so. MPT CEO Ed Aldag rightly noted in the company's Q3 call that hospitals typically don't receive reimbursement increases until after costs have risen. This can cause problems, but only temporarily.

Aldag pointed out that Medicare rates have historically risen faster than inflation. He said that MPT's tenants expect to successfully negotiate reimbursement rates with private payers that are greater than Medicare increases. As he put it, "It may not be immediate and all at once, but it is coming and in an escalating manner."

As for Pipeline's bankruptcy filing, MPT expects that the hospital operator will continue to pay its monthly rent. The REIT has had a few tenants declare bankruptcy in the past. In nearly every case, though, MPT was able to transition leases to new tenants with no interruption of medical services or rent payments. 

Steward's financial position continues to improve. Aldag said that the hospital operator should generate unadjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of between $50 million and $80 million this year.

The bottom line

The bottom line is that all of the good things mentioned earlier about MPT aren't too good to be true. They are true. The negatives are also true, but they're not as bad as they might seem when taken in context.

It's possible that MPT's revenue and profits could take a hit from a financially challenged tenant. However, that hasn't happened so far this year. And Aldag's optimism that the reimbursement environment will improve appears to be well-founded.

Ultra-high-yield dividend stocks can be risky. MPT certainly faces some risks for investors to consider. My view, though, is the stock's 10% yield, attractive valuation, and solid track record make the potential rewards worth the risks.