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Medical Properties: A REIT with a Difference

05/01/2015 8:00 am EST

Focus: REITS

Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

Our latest featured recommendation is a $2.6-billion real estate investment trust that owns and finances hospitals, acute care facilities, rehab centers, and medical offices, explains Mark Skousen, editor of High-Income Alert.

Healthcare, of course, is the largest and fastest-growing segment of the US economy. However, based in Birmingham, Alabama, Medical Properties Trust (MPW) is different…by design.

In addition to having more than 100 properties in the United States and Europe, MPW provides capital to acute care facilities of all kinds through long-term triple-net leases.

Under these agreements, tenants pay all real estate taxes, maintenance, and insurance. And MPW will provide up to 100% financing to reduce an organization’s cost of capital.

By allowing healthcare operators to tap the value of their real estate and put it to work in facility improvements, technology upgrades, new staff, and even construction, MPW allows healthcare centers to operate both effectively and cost efficiently.

As the only healthcare REIT focused exclusively on hospitals, MPW is low risk. According to a recent MedPac report to Congress, less than 1% of hospitals close each year.

Business is good here. MPW has beaten analysts’ estimates by a wide margin in each of the last four quarters. And I expect this trend to continue. MPW should earn $1.28 a share this year and nearly $1.50 in 2016.

Don’t be alarmed by the current price-earnings (P/E) ratio of 52. Medical Properties is quite cheap, selling for just 11 times consensus earnings estimates for the next 12 months.

In addition to the upside in the stock, we always insist on getting paid well in this service. MPW is no exception. These shares currently yield 5.9%.

In short, this is a low risk, high-yielding trust with excellent upside potential. I’m expecting good news when it announces quarterly results the first week of May. So buy Medical Properties Trust at market. And place a protective stop at $12.

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