Due to economic and geopolitical headwinds, financial markets have been exceptionally volatile in 2022. Goldman Sachs (GS -0.26%) recently noted that this year would likely be the sixth-most-volatile year dating back to the Great Depression. This has led the S&P 500 index to shed 21% of its value year to date. 

But the good news is that this volatility could lead to outsized total returns for investors with the right approach. Picking the right stocks with headwinds that the market perceives to be more threatening than what the broader market is experiencing could be quite lucrative in 2023 and beyond.

Shares of the hospital real estate investment trust (REIT) Medical Properties Trust (MPW 1.91%) have plunged 53% so far this year. Let's dig into the reasons why this ultra-high-yielding stock is a compelling comeback candidate to buy ahead of next year. 

The biggest tenant is on the verge of a recovery

By virtue of its portfolio of over 430 properties around the world worth $21.1 billion, Medical Properties Trust is among the largest owners of hospital real estate on the planet. Because under 1% of hospitals shut down in a given year, this makes the business model relatively dependable. 

But this isn't to say that there aren't risks to Medical Properties Trust that could explain the drastic sell-off in its stock this year. Based on its size, the REIT isn't as diversified as you would think. The biggest physician-owned private for-profit healthcare system in the U.S., Steward Health Care System, is Medical Properties Trust's largest tenant by far. Steward accounted for 29.5% of the company's $397.3 million in rent revenue during the third quarter ended Sept. 30. 

Like most hospital systems during the ongoing COVID-19 pandemic, Steward has struggled financially for a variety of reasons. Aside from the broader downturn in the stock market, this is the primary reason why the REIT's stock has fared so poorly in 2022. But Medical Properties Trust's chief financial officer, Steven Hamner, anticipates that Steward will be strongly cash flow positive starting in the last quarter of this year. If this is reflected in Medical Properties Trust's earning results over the next couple of quarters, this could put an end to concerns over Steward's financial health.

The market could instead focus on the steadily growing adjusted funds from operations (AFFO) per share that led Medical Properties Trust to be a perpetual outperformer until this year. That is why the average analyst's 12-month price target is $16, which represents a huge 46% upside from the current $11 share price. 

Surgeons working in the operating room.

Image source: Getty Images.

A reasonably well-covered dividend

The stock's 10.6% dividend yield is sixfold greater than the S&P 500 index's 1.7% yield. If a stock's dividend yield seems too good to be true, it usually is. However, Medical Properties Trust could be the exception to the rule. 

This is because the dividend payout ratio through the first three quarters of this year was just below 80%. That leaves the company with the capital needed to continue making property acquisitions and grow further. And it also provides a buffer to better endure periods when key tenants like Steward fall on tough times. 

The stock is dirt cheap

After the excessive beatdown it has suffered this year, Medical Properties Trust is trading at a rather cheap valuation. The stock's trailing-12-month AFFO-per-share ratio is a mere 7.6. 

The REIT could always fall further if its issues with Steward prove to not be resolved in the months ahead. But with how crushed the stock has been over the last year and the prospects of Steward's improving fundamentals, there could be much more to gain than to lose for contrarian investors.