If you're investing for the long term, you would expect to see a good return on your investment. The S&P 500, for instance, has averaged a long-run annual return of 10%. Over the last decade, the index cumulatively returned 173%, or 10.6% annually -- before factoring in dividends.
Unfortunately, not all stocks have been great investments over the years and some have crippled portfolios in the process. One stock that has struggled mightily in recent years is Medical Properties Trust (MPW 0.19%). But if you invested $10,000 in the stock a decade ago, would you still be ahead right now? Here's a look at where the stock was 10 years ago, and what your returns would look like if you had held on until now.
NYSE: MPW
Key Data Points
Where the stock was trading in January 2014
A decade ago, you might have been thinking that a real estate investment trust (REIT) focused on hospitals would be a great long-term investment. It pays a dividend, and it focuses on a stable sector of the economy -- what could go wrong?
On Jan. 2, 2014, shares Medical Properties Trust (MPT) closed at $12.30. If you had invested $10,000 in the healthcare stock back then, you would have been able to acquire 813 shares of the REIT. By the end of 2021, things were looking good, with the stock trading around $23. Unfortunately, rising interest rates combined with the fallout of the COVID-19 pandemic left some hospitals in tough shape, leading to a sharp decline in the stock's value since 2022.
Today, MPT stock trades at around $3.30. Those 813 shares would now be worth less than $2,700. But when you also include its dividend, your total investment would be worth approximately $5,100. MPT's total return over the past 10 years is negative 49% (versus negative 73% when excluding the dividend payout). MPT hasn't been a great stock to own, but the dividend has helped soften the blow to some extent.
The future may not look a whole lot better
Unfortunately for MPT investors, the REIT is still dealing with the effects of elevated interest rates. It has rent collection issues and recently said that it is working with one of its key tenants, Steward Health, to try to improve its financials. This is not something investors want to hear, and it's most likely the reason the stock is off to a horrible start to 2024, already down more than 30%.
If the REIT can weather the storm and interest rates do come down this year, there may be a way for MPT's stock to recover. But it's contingent on a lot of pieces, and there are still doubts about whether rate cuts will even happen this year. The company's funds from operations per share still look good -- $0.38 for the three-month period ending Sept. 30, 2023 (higher than its current quarterly dividend of $0.15) -- but the REIT's challenges are by no means over.
Until the company can prove its tenants are on solid footing and that rent collection issues are no longer a problem for the business, it won't be easy to win investors over. Even the stock's mammoth 18% yield isn't enough to tempt investors right now.
Investors shouldn't expect a quick turnaround for MPT
Even if MPT is able to turn its business around, it could take years for that to happen. And without lower interest rates, investors may still be hesitant to invest in REITs. Unless you have a high risk tolerance and are willing to be extremely patient with the stock, you're better off avoiding it entirely.
