Medical Properties Trust (MPW -1.10%) currently offers a 12.5% dividend yield. However, as alluring as that dividend might seem, income-focused investors should avoid it like the plague. That's because the healthcare REIT might not be able to sustain its payout much longer.

Instead, income-seeking investors should focus their attention on healthier dividend stocks. Johnson & Johnson (JNJ -0.46%) and Community Healthcare Trust (CHCT 2.65%) currently stand out as much safer options.  

Not healthy enough to buy for income

Medical Properties Trust is one of my larger holdings. I've owned shares of the healthcare REIT for over a decade. A big driver has been its above-average and steadily rising dividend.

Unfortunately, the hospital owner is facing several challenges these days. Its top two tenants are experiencing financial issues following the pandemic. One isn't currently paying rent. On top of that, surging interest rates are making it more challenging for the REIT to refinance debt. That's leading it to sell some of its properties to address its upcoming debt maturities.

I have full confidence that the REIT will pull through and be able to navigate its current headwinds. I also think it has a lot of upside potential as it addresses its issues and its current headwinds eventually fade.

However, I don't share the REIT's confidence that it won't need to eventually reduce the dividend to give it more financial breathing room. I don't think income-focused investors should buy the stock right now since the current dividend rate might not be sustainable.

Much healthier dividend stocks

While Johnson & Johnson (2.9% dividend yield) and Community Healthcare (5.4% dividend yield) don't offer dividend yields as high as Medical Properties Trust, they're above average (the S&P 500's dividend yield is 1.6%). They're also much healthier income streams. 

Johnson & Johnson has a top-tier financial profile. It has a AAA bond rating, tied for the highest in the world. That gives it unparalleled access to capital, allowing it to borrow money at lower rates. Meanwhile, it has significant liquidity. Johnson & Johnson ended the first quarter with $33 billion in cash and marketable securities against $53 billion of net debt. For comparison, Medical Properties Trust has junk-rated credit, which increases its borrowing costs and limits its access to capital. That's why it has had to sell hospitals to address upcoming debt maturities instead of refinancing those borrowings. 

Johnson & Johnson is also a cash flow machine. The company produced $17 billion in free cash flow last year after funding $14.6 billion in R&D expenses, easily covering its $11.7 billion in dividend payments. That enabled it to generate excess cash to strengthen its balance sheet and repurchase shares.

For comparison, Medical Properties Trust is on pace to pay out about 90% of its adjusted funds from operations (AFFO) this year in dividends ($1.16 per share in annual dividend payments on $1.29 per share in annual AFFO). That leaves it with little breathing room and doesn't allow it to retain much cash to fund new investments or strengthen its balance sheet. 

Community Healthcare Trust might not be as financially fit as Johnson & Johnson. However, it's still a lot healthier than Medical Properties Trust. The fellow healthcare REIT has a much lower dividend payout ratio of 72.5% ($0.45 per share quarterly dividend payment on $0.62 per share in AFFO in the first quarter). That gives it a much bigger cushion while allowing it to retain more cash to fund new investments and maintain a strong balance sheet. 

It has a much healthier balance sheet. Community Healthcare doesn't have significant debt maturities until 2026, giving it lots of breathing room. It also has low leverage ratios (less than 40% debt to property value). On the other hand, Medical Properties Trust has had to sell assets to address its 2023 and 2024 maturities. It has even more debt coming due starting in 2025 that it will need to address eventually. The REIT also has a higher leverage ratio of around 50% debt to property value), which is why it has had to de-lever its balance sheet.

Too risky as an income stock right now

Medical Properties Trust faces an uphill battle in addressing its upcoming debt matures while trying to work with its financially struggling tenants. The healthcare REIT might eventually need to cut its dividend to de-lever its balance sheet. While I hope that's not the case, the stock is too risky for income investors to buy right now. They should consider healthier options like Johnson & Johnson and Community Healthcare Trust. They offer above-average yielding dividends backed by much stronger financial profiles. Those features make them much safer options for those seeking steady dividend income.