Medical Properties Trust (MPW) is an ideal income-producing stock to own as the Federal Reserve pauses its money printing, notes growth and income expert Brett Owens, editor of Contrarian Outlook.
The shares yield 4.8% and have the potential to return up to 9.8% per year. In a market that is likely to be a “hot mess,” MPW should be a popular destination during flights to safety.
Years ago, easy financing didn’t exist for hospitals. If someone wanted to build a hospital, their only option was a traditional corporate loan package. This was a big headache because it forced the hospital to lock up all of its asset value as collateral.
Ed Aldag founded MPW in 2002 to tackle this problem. He and his team developed finance offerings for hospitals as a low-cost and flexible alternative. It worked — Aldag’s company would become the largest investor in hospital real estate in the U.S.
Now 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 complex.
MPW’s portfolio is made up of 444 properties that are run by 54 different operators. These locations are spread across 32 states and nine countries. The largest facility accounts for just 2.6% of the firm’s overall portfolio.
Operators like partnering with Ed’s team because they get to keep running the show. MPW, in turn, earns a 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 as a “magnet” that pulls its share price higher. As I mentioned, the stock pays 4.8% today, but that isn’t the end of 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 8.8% to 9.8% per year from MPW. Aldag guided the company expertly to the “other side” of 2020. It’s the perfect stock for a potentially terrible 2022.
