Normally, when a inventory has a dividend yield approaching or exceeding double digits, it’s for an excellent purpose. Meaning the inventory and/or dividend is sort of dangerous.
Medical Properties Belief (NYSE: MPW) has a yield of 9.7%. So can buyers count on the corporate to maintain such a excessive yield?
The Alabama-based actual property funding belief (REIT) is the owner for hospitals and is the second-largest nongovernmental proprietor of hospitals on the planet. The vast majority of its 434 properties are positioned within the U.S., adopted by the U.Ok., Switzerland and Germany.
The inventory has been smashed this yr, falling 49% yr to this point, which is one purpose the yield is so excessive.
In April, a brief vendor went public with their bear thesis that the corporate’s enterprise was slowing and the inventory was overvalued. That led to a dramatic fall within the inventory value. It has recovered a bit of bit since hitting a backside under $10 in October, nevertheless it’s nonetheless half of the place it was in January.
Whereas the quick vendor has been proper in regards to the inventory value’s route, they’ve been unsuitable in regards to the firm’s enterprise deteriorating.
Funds from operations (FFO), the measure of money stream that we use for REITs, is predicted to develop this yr to $1.08 billion from $976 million. Subsequent yr, FFO is forecast to stay flat.
This yr, Medical Properties Belief is projected to pay out $694 million in dividends, for a payout ratio of 64%. Subsequent yr, Wall Avenue expects the payout ratio to inch as much as 66% on an anticipated $713 million in dividends paid.
The corporate’s yearly dividend per share has been greater in every of the previous 10 years, giving it a powerful dividend-raising historical past.
The inventory might have been creamed this yr, however the dividend is well lined by FFO and the 10-year monitor document of annual dividend will increase means that administration takes the dividend very severely.
Regardless of the sky-high yield, Medical Properties Belief’s dividend is secure.
Dividend Security Score: A
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