Investors may be enticed by Medical Properties Trust (NYSE: MPW) and its high forward dividend yield of over 15%, as the company invests in hospital real estate for rental purposes. However, appearances can be deceiving, and a high yield often signifies high risk.
Unfortunately, Medical Properties Trust is not a stable dividend stock. The company cut its dividend last year due to its deteriorating financial position, which is expected to worsen. With a total debt of $10.1 billion and upcoming repayment costs between 2025 and 2027, the company’s ability to sustain its dividend is questionable.
Adding to the uncertainty, Medical Properties Trust’s largest tenant, Steward Health Care, filed for bankruptcy in May, further impacting the company’s financial stability. As a result, the company is selling off properties to generate cash, leading to a decrease in rental revenue and assets.
For investors seeking safe dividend income, it is advisable to consider lower-yielding options with a payout ratio below 70% of net income. Additionally, investing in a diversified ETF like the SPDR Portfolio S&P 500 High Dividend ETF, which offers a 4.6% annual yield, may be a safer choice.
Before investing in Medical Properties Trust, it is important to weigh the risks associated with the company’s financial challenges. Considering alternative investment options and conducting thorough research can help investors make informed decisions about their portfolio.