This is just a quick note to let you know that recent weakness in the shares of Medical Properties Trust (MPW), following their announcement of a stock offering, led a buy order to trigger in my account and I have now doubled my holdings in MPW.
This is a real estate investment trust that does sale/leaseback deals with hospitals and urgent care centers and similar single-tenant health care facilities in the US, with recent expansion to Germany. As a REIT they have to pay out essentially all income to shareholders (unitholders, if you prefer) in the form of dividends, and in practice they pay out the lion’s share of cash flow as well as the legally required 90% of taxable income, so like most REITs they need to either borrow or sell stock if they want to expand. MPW has done both, and will likely continue to do both, and it doesn’t bother me as long as they keep finding accretive deals to invest that money for good returns, as they seem to me to be doing.
When MPW gets down below $13 the yield ticks up to about 6.5%, which is substantially better than their average healthcare REIT peer. I think they’re actually a better company than many of their peers, too, particularly those who own nursing homes and medical office buildings, because hospitals are far more irreplaceable and unique than those commoditized buildings — hospitals do close down sometimes, but it’s a big deal when they do, and MPW has had very strong partners so far. What spurred me to buy originally last Fall was the fact that they increased their dividend for the first time since the financial crisis, which provides some indication that they may become a dividend growth REIT again … no proof of that yet, but it puts them on the right track. I think MPW is likely to continue growing nicely and steadily, and I think it’s likely that they’ll outperform the other healthcare REITs … and if health insurance changes mean more patients have insurance, hospitals will see their books improve, making them better partners. No big change in my opinion here, just a good stock that got cheap enough to make me want to buy more.