Medical Properties (MPW) is a real estate investment trust that acquires and develops health care facilities, including acute care hospitals, inpatient rehabilitation centers and medical and surgical facilities. explains Mark Skousen, dividend specialist and editor of High-Income Alert.
The REIT, based in Birmingham, Alabama, doesn’t just operate in the largest and fastest-growing segment of the U.S. economy. By handling the most pressing business needs of these providers — arranging financing and offering long-term triple-net leases — it improves the quality of health care.
Triple-net leases are good for lessors, since the lessee pays rent, utilities and also is responsible for the ongoing expenses of the property, including real estate taxes, building insurance and maintenance.
The operators of hospitals and other health care facilities are freed to upgrade technology, make facility improvements, add staff and unlock the value of their real estate assets. By operating as a REIT, Medical Properties avoids corporate taxes as it must pay out at least 90% of net cash flow to shareholders in the form of dividends.
As a result, the yield here is an attractive 5.9%. And that dividend will rise with earnings in the months ahead. Not that financials are shabby now. In the most recent quarter, net income soared 43% on a 21% increase in revenue.
And while the market has been essentially flat over the past 12 months, shares of Medical Properties are up over 30%. No wonder the stock is among the Top 10 of Investor’s Business Daily publisher William O’Neill’s elite list of the nation’s most promising momentum stocks.
Medical Properties will report financial results again on February 14. While Wall Street expects earnings of $0.22 a share, I estimate that MPW did about 10% better. A beat here and a positive outlook should send these shares higher. So, pick up Medical Properties at market and place a sell stop at $14 for protection.
