Years ago, easy financing didn’t exist for hospitals. To build a hospital, the only option was a traditional corporate loan—a big headache because it forced the hospital to lock up all the asset value as collateral, recalls Brett Owens, editor of Contrarian Income Report.
Ed Aldag founded Medical Properties Trust (MPW) in 2002 to tackle this problem. He and his team developed low-cost and flexible alternative finance offerings for hospitals. It worked: Ed’s company became the largest investor in hospital real estate in the U.S.
MPW doesn’t run hospitals; it invests in them. The company provides capital to the operators, particularly proven ones. In turn, they use the money to improve their facilities, upgrade their technology, hire more staff, and expand their complexes.
Operators like partnering with Ed’s team because they get to keep running the show. MPW, in turn, earns a sweet return on its investment capital.
And we like partnering with Ed because he pays generous dividends. MPW is structured as a real estate investment trust (REIT), which gives the company a tax-advantaged status assuming it meets one requirement: It pays most of its profits to shareholders.
MPW is special because its ever-rising dividend acts like a “magnet” that pulls its share price higher. This “dividend plus growth” technique is a simple formula for sweet total returns. The stock yields 5.2% today, but that isn’t the end of the MPW’s total return story.
Over time, MPW’s stock price rises with its dividend. Thanks to 4% to 5% yearly payout increases, we have an additional 4% to 5% of price upside “baked in” — which means we can expect to earn 9.2% to 10.2% per year from MPW.