Markets

Medical REIT's Stock Lags But Not Its FFO

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M edical Properties Trust ( MPW ), a REIT holder of acute-care hospitals, delivered accelerating growth in the past two quarters, yet the stock is in the doldrums.

What's happening with this stock?

In recent quarters, funds from operations (FFO) grew 8%, then 15%, and 19%. Revenue showed signs of acceleration going back a bit further: 21% sales growth, then 31%, 30%, and 42%.

Yet the stock is 27% off its January high.

The quarterly dividend is 22 cents a share, which works out to an annualized yield of 7.8%. A huge payout like that is enough to scare off conservative investors and tempt aggressive investors. In this market, a yield of more than 7% beats the market, assuming the stock doesn't dip lower.

Two factors to consider: First, beginning with its January 2009 payout, Medical Properties slashed its quarterly dividend from 27 cents a share to 20 cents a share. Some income investors will back off from any stock with such a history.

Second, since February 2013, Medical Properties has had five secondary offerings. Proceeds were used to fund acquisitions and repay debt. Many conservative investors will shy away from buying into companies with many offerings over a relatively short period.

Medical Properties Trust's holdings, however, are diversified. At the earnings call in November, CEO Edward Aldag said that no one property accounts for more than 2% of the overall holdings.

Acquisitions have played a key role in the company's growth. In 2015, Medical Properties made eight acquisitions.

Aldag told analysts that he is "very bullish" on acute-care hospitals, which make up about 70% of Medical Properties' portfolio. "You cannot paint a picture where we would not have hospitals in this country," he said.

Through September, the number of funds either holding or increasing a position rose from 362 to 436. The overall stake rose 42%.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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