This 6%-Yielding Dividend Stock Is Finally Healthy and Could Start Growing Again

Matt DiLallo, The Motley Fool

Mon, May 5, 2025, 2:05 AM 5 min read

• Medical Properties Trust's first-quarter results showcased the stabilization of its portfolio.

• The REIT has also completed the necessary repairs on its balance sheet.

• It can now shift its focus back to growing shareholder value, including potentially increasing its dividend.

Medical Properties Trust (NYSE: MPW) has battled two ailments over the past couple of years. The real estate investment trust's (REIT) top two tenants ran into severe financial issues, forcing both to ultimately file for bankruptcy. That issue and higher interest rates made it hard for the hospital landlord to refinance debt as it matured.

After two years of hard work, the healthcare REIT is finally healthy again. As a result, its 6%-yielding dividend, which it cut twice during that period, could start growing again. That makes the REIT a potentially enticing option for those seeking an attractive income stream.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Medical Properties Trust spent the past couple of years simultaneously working with two major tenants as they addressed their financial issues while also trying to shore up its balance sheet situation. The company took several steps to address the problem, including replacing one tenant with several new ones, selling properties to repay debt, and cutting its dividend twice.

The REIT finally started to see the fruits of its labor during the first quarter. Replacement tenants began paying rent on properties formerly operated by one of its bankrupt tenants during the quarter. Rental rates on those properties will steadily escalate over the next two years, reaching the fully stabilized rate at the end of 2026 (at about 95% of the former tenant's rate). That incremental rental income enabled the REIT to generate $0.14 per share of normalized funds from operations (FFO) in the period, easily covering its $0.08-per-share quarterly dividend.

The stabilization of these properties and its efforts to repay debt in recent years finally put the company in a position where it could refinance existing debt at an acceptable rate. Medical Properties Trust issued over $2.5 billion of senior secured notes due in 2032 at a blended rate of 7.885%. That significantly extended its debt maturities.

The company also amended its credit facility to $1.3 billion, which now matures in mid-2027. As a result, the REIT has a lot more financial flexibility.

In commenting on the quarter, CEO Edward Aldag stated in the earnings press release, "Our first-quarter transactions and results are the culmination of two years of successful efforts to reduce debt, extend maturities, capture unrealized value, and retenant hospital real estate at attractive and sustainable rents."