U.S. REITs – Will Share Price Decline Stop Medical Properties Trust?

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Medical Properties Trust (NYSE:MPW) is in the upper echelon of healthcare REITs. The company has enjoyed relatively strong growth results, when measured against 2014 metrics, especially the funds from operations (FFO) per share, and projected FFO for the 2015 fiscal year. In addition, their current dividend yield of eight percent is above the sector median and price-to-FFO of 9.4x is below the sector median.

Medical Properties began distributing dividends in 2005. The company has yet to miss a quarterly dividend, and has always either increased or maintained the dividend payouts with the exception of 2008. At that time, Medical Properties decreased the dividends from $0.27 down to $0.20. After a long hiatus with zero dividend increases, the company has resumed dividend growth over the past two years. In March of this year, they increased dividends by five percent up to $0.22.

The majority of Medical Properties investments have been in net-lease healthcare facilities, particularly focusing on acute care and rehabilitation hospitals. The company is also in the mortgage business, providing both mortgages and other type of loans to their tenants. This book of business comprises approximately eleven percent of their assets. Medical Properties owns real estate in the US, and internationally as well. They have a large presence in California and Texas, and close to twenty percent of their investments are in Germany and the United Kingdom.

A main contributor to Medical Properties growth is their continued acquisition and development program. This has led them to grow their Adjusted FFO by forty percent in the second quarter of 2015, compared to the same period in 2014. To fuel this growth, Medical Properties has issued equity and debt over the past year. Last December, Medical Properties received an investment grade rating of BBB- on their unsecured debt from Standard & Poor’s.

More recently industry share prices have decreased, including theirs. This factor makes it hard to accurately determine how it has affected the company’s funding. This August the company announced a public offering of common shares to fund acquisition activity. Regarding debt, the company’s total debt to total capitalization has tended to be on the high side, reaching a high level when compared to other healthcare REITs.

Disclaimer: This newsletter is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Please do your own due diligence before making any investment decision. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.

Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.

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