Medical Properties Trust Inc. (NYSE: MPW), a Birmingham, Alabama-based healthcare real estate investment trust (REIT), has seen its stock price surge over 22% in recent weeks after being beaten down for most of 2022.
Overview of Medical Properties Trust
Medical Properties Trust owns and operates 441 hospitals, general acute care facilities, behavioral health facilities, inpatient rehabilitation hospitals, long-term acute care hospitals, and other medical properties across the United States and in 9 other countries. The company’s portfolio is valued at $19 billion.
63.7% of Medical Properties Trust’s properties are general acute care hospitals. Around two-thirds of its facilities are located in the U.S., with the remainder spread across Europe, Australia, New Zealand, Colombia, Mexico,Brazil and Chile.
The REIT collects rents from hospital operators and tenants under long-term net leases, generating stable cash flows. Its largest tenants include Steward Health Care System, Prospect Medical Holdings, Circle Health and pipelines Health System.
2022 Struggles
Medical Properties Trust has faced significant headwinds in 2022. Rising interest rates have increased borrowing costs and made it more expensive to refinance debt. Operators have also faced financial difficulties, with Steward Health Care System restructuring its lease agreements.
In November, JP Morgan analyst Michael Lapides maintained an Underweight rating on MPW stock and cut his price target 37.5% from $8 to $5 over concerns about the REIT’s high leverage and ability to refinance debt.
Like other heavily leveraged REITs, Medical Properties Trust will need to carefully manage its debt load and refinancing needs in 2023 and 2024 as existing loans mature. Lower interest rates in 2024 could provide some relief.
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Is the Stock Recovering?
Despite the challenges, Medical Properties Trust stock has been on a tear lately. Shares recently hit a multi-month high of $5.76 on December 14, up 22.4% from a 52-week low of $3.96 on November 13.
While still down nearly 50% year-to-date, the stock seems to have found a bottom and could continue rebounding if the REIT delivers solid operating results. Analysts expect MPW to generate full-year 2022 FFO of $1.80 per share.
With a dividend yield of 12.37%, Medical Properties Trust offers an attractive income stream at today’s prices. The forward payout ratio of 38.21% also seems reasonably safe.
However, the stock remains volatile with a beta of 1.4. The high short interest of 23% could also lead to price swings as short sellers cover positions.
Conservative income investors may want to wait for more clarity on debt refinancing and stabilization in operator finances. But for investors with a higher risk tolerance, the recent recovery in Medical Properties Trust could signal a turning point after a brutal year.
Frequently Ask Questions
What does Medical Properties Trust do?
Medical Properties Trust is a healthcare-focused REIT that owns and operates hospitals, acute care facilities, behavioral health facilities, rehabilitation hospitals, and other medical properties. The company generates revenue by leasing these properties to hospital operators and healthcare providers.
How many properties does Medical Properties Trust own?
Medical Properties Trust has a portfolio of 441 healthcare facilities located across the United States and 9 other countries. Its portfolio is valued at $19 billion.
What has happened to MPW stock in 2022?
MPW stock has struggled in 2022, falling nearly 50% year-to-date. The stock has been hurt by rising interest rates, debt concerns, and financial difficulties faced by some of its tenant operators. However, shares have rebounded 22% from November lows.
Why did JP Morgan lower its price target on MPW?
In November, JP Morgan cut its MPW price target by 37.5% to $5 over concerns about the REIT’s high leverage and ability to refinance debt in a rising rate environment. The analyst has an Underweight rating on the stock.
Is MPW’s dividend safe?
MPW’s dividend yield of 12.37% is attractive. The forward payout ratio of 38.21% suggests the dividend should be safe in the near term. However, the high yield indicates risks longer-term if operating conditions deteriorate.
Should income investors buy MPW stock now?
More conservative income investors may want to wait for more clarity on debt refinancing and stabilization in operator finances. But for investors with a higher risk tolerance, the recent recovery in the stock could signal a turning point after a difficult 2022.