Stock: MPW
Rating: Strong Buy
Author: Waleed M. Tariq
Overview
- Medical Properties Trust acquires and develops net-leased hospital buildings.
- Most of the company’s 438 properties are in the US and UK.
- The company owns 207 acute care, 111 rehabilitation, 58 behavioral health, 42 ER/URC, and 20 long-term acute care hospitals.
Bullish
- REITs do better in moderately high inflation environments.
- Medical Properties Trust has increased its dividend for 9 years in a row.
- MPW’s current valuation is attractive for investors.
Bearish
- The corporation has huge debt which is a concern to investors.
Diversify with REITs
- REITs offer competitive returns from dividends and share price growth. Low correlation makes them good portfolio diversifiers, mitigating risk and boosting returns.
Slow yet steady dividend growth
- At $20.5 a share, the annualized Dividend Yield of 5.65% beats the Healthcare Real Estate sector’s average yield of 4.05%, the REIT industry’s 2.85%, and the S&P 500’s 1.250%.
- The company has increased dividends every year for almost a decade, albeit slightly.
Valuation
- Healthcare REITs have a price-to-FFO of 19.78. The stock would be $34 at 19.78 P/FFO, a 70% gain. P/FFO cannot be used alone to determine valuation, even if companies with lower P/E or P/FFO multiples are normally better placed.
Conclusion
- Current stock value gives investors an attractive entry opportunity. MPW is an excellent income stock for those seeking passive income.