medical property trust (MPW 1.45%) is a high-yielding dividend stock. It’s paying a staggering 13% at its current share price. However, such high yields are often a sign of investor concern, and indeed investors are concerned that this real estate investment trust (REIT) is overly dependent on a handful of tenants. increase. In fact, the company recently found itself in trouble with a large tenant who hasn’t paid their rent in full.
However, there are signs that things may improve for REITs, as the performance of the REIT’s main tenants, hospitals, may start to improve this year.
Top Hospital Executives Report Promising Revenue Results
A major risk for Medical Properties Trust is whether tenants will be able to continue paying rent. If so, REIT payouts will continue, and perhaps even healthcare stocks can rebound if the underlying business proves to be stable.
there is reason to be optimistic HCAHealthcare (HCA -0.21%)The company, which operates hospitals and medical facilities across the country, has recently reported some positive financial results, suggesting that health care industry conditions may be improving. HCA isn’t listed as a major tenant of the Medical Properties Trust, but if the hospital is doing well, it could bode well for REIT tenants as well.
For example, the bane of hospitals during the pandemic was their ability to maintain adequate staffing levels. Due to the lack of manpower, the hospital had to rely on temporary workers. This often results in a high premium and can significantly squeeze your bottom line.
On April 21, HCA reported quarterly earnings for the first three months of 2023, with net income improving just 5% from the same period last year to reach a profit of $1.5 billion.
But arguably the more significant development was the news that staffing levels were improving. “As our working conditions continue to improve, we believe we can unlock more surgical capacity,” said Samuel Hazen, CEO of HCA.
As a result of the stronger outlook, the company has raised its 2023 forecast and now sees adjusted earnings per share in the range of $17.25 to $18.55, compared with previous estimates of $16.40 to $17.60. I predict it will be
Good sign for medical property
If top-tier hospital operators like HCA are increasing operational stability, that could indicate that healthcare facility tenants could benefit from similar trends.
The healthcare industry has been struggling for years due to the pandemic, and with the public health emergency set to end this month, hospitals and the industry as a whole may finally get back to normal.
HCA’s turnaround does not mean that all Medical Properties’ tenants will be financially better. its portfolio.
Is Medical Properties Trust a Buy?
The Medical Properties Trust appears to be a slightly safer buy than it was a week or two ago with these developments.
But this is still not a stock I would consider buying right now. The REIT still doesn’t have a big buffer in terms of earnings, as his funds under management (FFO) for the period ended March 31 was just $0.31. -Share the profit. And its FFO is $0.31, just above the REIT’s quarterly dividend payout of $0.29.
This leaves no room for investors to get too comfortable with stocks and their dividends. And even if the dividend may be safe for the foreseeable future, the Medical Properties Trust has a terrible track record as an investment, so you have to be cautious. Things may be improving for REITs, but investors shouldn’t be in a rush to add stocks to their portfolios as the risks haven’t gone away.
At the very least, we should consider waiting another four or two quarters to see if the REIT’s financials improve.
David Jagielski has no positions in any of the mentioned stocks. The Motley Fool invests in and endorses HCA Healthcare. The Motley Fool’s U.S. headquarters has a disclosure policy.