Friday File pt. 2: Annual Review continues

Checking in on MPW, COR, OHI, LGND, SWKS, FNV and SQ

By Travis Johnson, Stock Gumshoe, February 10, 2018

A few more company updates for you as we finish up the Annual Review… almost done now, though a couple stragglers remain.

Medical Properties Trust (MPW) ~2% position, $9.87 cost basis, currently ~12$.

I’ve held this volatile hospital REIT for more than four years now, through a couple ignored stop-loss triggers along the way when the market overreacted to financial problems a couple of their tenants were having, and I continue to think that it is habitually underpriced given the unique nature of its properties and the strength of its diversified portfolio of (mostly) hospitals, acute care facilities and rehab centers. They reported earnings this week and beat the analyst estimates on most metrics, with normalized funds from operations for the year at $1.35 per share and revenue above estimates… and, more importantly, they also reported that they anticipate growth in normalized FFO per share in 2018 of roughly 7% (that would be the middle of the $1.42-1.46 range they forecast). That gives them room to grow the dividend, which is what most REIT investors care about. I think MPW is a buy anywhere near $12 for a diversified REIT portfolio, though opportunistic investors in a interest-rate panic, if that materializes, might be able to purchase shares between $10-11.

MPW typically announces their quarterly dividend about a week following the earnings report, so we will hear next week what the next quarterly payout will be — my guess is that they will increase the dividend by either one or two cents per quarter, most likely one cent to give them a quarterly dividend of 25 cents. That would mean ample coverage for the dividend ($1 in expected payouts, versus $1.44 in anticipated NFFO per share), so they could be more aggressive at increasing the dividend, but they haven’t generally been aggressive dividend hikers in the past — and it is important to note that the “normalized” word is important, that’s what they think the properties would be earning if all were “normal,” not exactly what the properties are earning right now. So you get a dividend that should amply covered, growing at faster than the rate of inflation, and providing a well-above-average current yield of 8%. That’s an easy buy for me, even with rising rates — particularly because they will not face any immediate pressure from the bond market (their next debt maturity ...

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