Shares of Medical Properties Trust (MPW +2.17%) were jumping 3.5% higher as of 11:15 a.m. ET on Wednesday and rose as much as 6.9% earlier in the day. The gain came after comments from Federal Reserve Board members sparked hopes that interest rate cuts could be on the way in 2024.
Fed governor Christopher Waller stated, "I am increasingly confident that policy is currently well positioned to slow the economy and get inflation back to 2%." Waller added later that there was "no reason" to keep interest rates "really high" if inflation continues to fall. Chicago Fed President Austan Goolsbee appeared to be on the same page, pointing out risks in maintaining interest rates at high levels for too long.
NYSE: MPW
Key Data Points
What lower interest rates could mean for Medical Properties Trust
To be sure, the Fed hasn't unequivocally signaled that interest rate cuts are on the way. However, it does sound as if cuts could be on the table in the first half of next year. So what would lower interest rates potentially mean for Medical Properties Trust?
The fortunes of real estate investment trusts (REITs) such as Medical Properties Trust depend heavily on interest rates. Most REITs borrow extensively to buy properties. Their costs go up if they have to finance (or refinance) loans at higher rates. But if rates are lower, their costs are also lower.
Higher interest rates have curtailed Medical Properties Trust's ability to grow. CEO Ed Aldag specifically linked growth and cost of capital in his comments in the October press release announcing the REIT's third-quarter results.
Is Medical Properties Trust stock a buy?
Medical Properties Trust remains a volatile stock that risk-averse investors will want to avoid. However, aggressive investors seeking income will probably like the REIT's dividend yield of 12.2%. If the Fed does cut interest rates in early 2024, look for Medical Properties Trust to rebound.
