Medical Properties Trust (MPW -1.10%) is a real estate investment trust (REIT) that has hundreds of hospitals in its portfolio. While this type of business might normally result in long-term stability, that hasn't been the case recently. Medical Properties stock has struggled, and it might surprise you just how bad its returns have been since 2020.
I'll look at how much a $25,000 investment in the company would be worth today, and whether the stock is on a more positive trajectory right now.
How the stock has fared since 2020
On the first day of trading in 2020, shares of Medical Properties closed at a price of $20.79. If you invested $25,000 in the healthcare stock back then, that would have been enough to acquire approximately 1,203 shares of the company.
Today, the stock trades at around $10, putting the value of those shares at approximately $12,000. That means investors who bought the stock at the start of 2020 would be down approximately 52%. By comparison, the same sized investment in the S&P 500 would be worth $35,000 right now.
It's hard to entirely blame Medical Properties, however, as the pandemic disrupted the entire healthcare industry in 2020, shifting priorities for hospitals while also putting people in care homes at risk. With the REIT's portfolio focused heavily on hospitals, Medical Properties faced significant headwinds. Despite the adversity, the company has not only continued paying a dividend, but has even raised its payouts since then.
Despite its early resiliency, Medical Properties hasn't come away completely unscathed. In the past year, the REIT has had multiple tenants struggle to pay rent. As a result, shares of Medical Properties have been nosediving and are now down 37% over the last 12 months.
Plenty of risk for investors who buy today
Medical Properties continues to pay a high dividend, and today the yield is up to 11.8% due to the crashing share price. That's an enormous payout when you consider the S&P 500 averages a yield of only 1.5%. It would be a mouthwatering payout for investors if it weren't such a risky one.
The consensus analyst price target for the stock is just over $13, but analysts have been downgrading and lowering their price targets for Medical Properties in recent months. Unless the company gives reasons for investors to be more bullish about its future when it reports earnings in the weeks ahead, another wave of downgrades could soon be coming for the healthcare stock.
During the first three months of the year, Medical Properties had to write off nearly $40 million in unbilled rent and incurred over $52 million in real estate impairment charges. Funds from operations (FFO) totaled $186.3 million and declined by 33% year over year. On a per-share basis, FFO of $0.31 (versus $0.47 a year ago) was only marginally higher than the $0.29 the company pays out in dividends per quarter.
If there's any further deterioration in earnings, Medical Properties may need to take drastic measures, including potentially reducing its dividend.
Don't rely on the dividend or the stock
Medical Properties Trust hasn't been a good investment to hold over the years, and with the economy struggling right now, there's no reason for investors to expect a better outlook for the stock. The prudent thing for investors to do is to wait and see how the REIT does this year, because how it navigates a challenging year in 2023 can help investors evaluate the ability for it to continue paying its dividend in the future and whether it's realistic to expect that the stock can bounce back and rise in value.
Based on where it is today, there's still too much uncertainty to know the answer to those questions, which is why the safest thing to do would be to steer clear of Medical Properties stock for now.
