Investors looking for attractive dividends can always find something of interest in turnaround stories. There are, however, high-risk turnarounds and low-risk turnarounds. Medical Properties Trust (MPW 0.34%) is a high-risk story, while Prologis (PLD 0.58%) and Rexford Industrial (REXR -0.41%) are both of the low-risk variety. That's why Medical Properties Trust is probably best avoided and both Prologis and Rexford deserve a deep dive.
What happened to Medical Properties Trust's dividend?
Medical Properties Trust is a real estate investment trust (REIT) that owns hospitals. Its dividend has gone from $0.29 per share per quarter in the middle of 2023 to $0.15 by the end of that year. It fell again to just $0.08 per share per quarter in the second half of 2024. It is still at that level, which is a huge 72% cut from the $0.29 per share it was at just a few years ago.
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The big problem was that some of Medical Properties Trust's largest tenants experienced financial hardship. And that, in turn, led to the tenants being unable to pay their rent. The obvious domino effect is that reduced rent collections made it untenable for Medical Properties Trust to keep paying its dividend. It had no choice but to cut it.
The turnaround story here is that it looks like the bad news could finally be over. And that means that Medical Properties Trust can start working to rebuild its business and get back to dividend growth. But hospitals are large and unique assets, so getting back on track is probably going to be a slow process. It seems unlikely that three years will be enough time for management to complete what is going to be a fairly big task.
Prologis and Rexford are better positioned to recover
So Medical Properties Trust's lofty 7.2% dividend yield probably isn't going to be worth it for most dividend investors, who tend to be a fairly conservative group. Far better options would be Prologis and Rexford, which have yields of 3.8% and 4.7%, respectively. Those are much lower yields, but they both happen to be toward the high end of the range for each REIT during the past decade.
The big headwind right now is really more emotional than it is business-related for Prologis and Rexford. Each of these industrial REITs is focused on owning warehouses in key shipping regions. With the geopolitical tensions and tariff upheaval going on today, investors have dumped the stocks, fearing the worst. While not an unreasonable reaction, it is likely to be shortsighted. Given how interconnected the world is today, it seems likely that companies will find a way to adjust to any tariff changes that happen. And, thus, demand for well-located warehouse space will remain strong over the long term.
Prologis is the less risky choice, given that it has a globally diversified portfolio. It basically owns properties in all of the world's key transportation hubs. Rexford is a bit riskier because it is focused entirely on the Southern California market. But that market is supply-constrained and, thus, Rexford tends to have strong pricing power when it comes to the rents it charges. Southern California is also the main gateway for Asian goods coming into the U.S. market.
Notably, in the first quarter of 2025, Prologis was able to increase its rents by just over 30% on a cash basis while Rexford's rents jumped by nearly 15%. Clearly, these are still very strong businesses even though investors are avoiding the shares. And that suggests that, once the tariff kerfuffle is over, there is a good chance of investors placing a higher valuation on the stocks. Even if the tariff issue lingers, they both continue to work from a position of strength, unlike Medical Properties Trust, which is working back from deep fundamental business problems.
Choose your risks wisely
There's no question that a big yield is very attractive, but as Medical Properties Trust shows, sometimes the risks aren't worth, well, the risk. But other times, Wall Street offers up compelling opportunities with well-run companies because of emotionally driven decisions. That seems likely to be the case with Prologis and Rexford, still well-performing businesses despite their relatively attractive yields, historically speaking. Over the next three years, it seems far more likely that investors will be better served with lower-yielding Prologis and Rexford than with a high-risk dividend cutter like Medical Properties Trust.
