Covid-19 continues to slam different sectors of the economy forcing income investors to look for a corona-proof REIT with a high yield.
Real estate investment trusts (REITs), long the domain of dividend hunters, have taken a big hit this year … with some REITs still trading in bear market territory.
And the outlook for REIT’s prime clients … shopping malls, retail and restaurant space and even commercial office real estate … is uncertain at best.
But here is a corona-proof REIT that you can count on today to continue to support a generous dividend and stock appreciation at the same time.
Medical Property Trust
Medical Properties Trust, Inc.(NYSE: MPW) is a pure-play hospital REIT.
This self-advised investment trust invests only in hospitals- specifically those with long-term leases. Essentially, MPW is involved in the investment, acquisition and development of healthcare facilities. These include general-acute care hospitals used for ER services and short-term care.
MPW is one of the top REIT picks in the market right now. Since making its IPO debut in 2005, the shares have generated returns of 500%.
In just the last three months the stock is up 13%. At its current price, MPW offers a dividend of over 5% with a portfolio big enough to reward income investors for years to come.
Why Medical REITs are the new moneymakers?
Despite a volatile market in 2020, MPW remains an investor-favorite for many reasons. Here’s why it is considered the new moneymaker:
Stability
Uncertainty has been the hallmark of 2020 and most major stocks hit new lows at the onset of the pandemic. However, MPW remains the outlier thanks to its stability. Many REITs were impacted when tenants were unable to meet their rent payments in March and April. While hospitals were not immune to the effects of the corona-economy, MPW fared better than other REITs with 98% of the rent collected.
MPW was able to hold its ground during this turbulent time due to its significant amount of rent coverage. Nearly 96% of the properties in its portfolio come with a parent guarantee. This means that if a tenant decides to shut their doors, they are still responsible for the rent. Adding to this stability, nearly 82% of the leases held by MPW don’t expire till 2030. This makes MPW a safe buy in any economic environment.
A strong portfolio
Medical Properties Trust currently yields 5.75% which higher than the S&P500 and other REITs. This dividend has grown by 3% on average since 2013 and shows greater upside ahead. A major reason for this is the MPW’s diverse portfolio and strong balance sheet. This allowed the medical REIT to weather the Covid-storm with ease.
MPW is the second-largest owner of hospitals in the U.S and has a portfolio worth over $17.6 billion. It currently owns 389 facilities and more than 41,000 beds in eight countries across three continents. With over 5,000 hospitals in the U.S., MPW in a great position to benefit from more lease opportunities in the future.
MPW’s growth this year was also sustained by the government’s $2 trillion stimulus package to support Medicare payments and cash flow. To add to this safety net, the REIT has no major debt due until 2024. Many investors flocked to MPW this year for this very reason.
Healthy growth ahead
Hospitals have been ground zero for the pandemic this year but this has not impacted MPW’s bottom line. In addition to collecting a majority of its rent payments this year, the company closed multiple acquisitions as well.
MPW recently purchased a rehab facility in Germany and a medical facility in California for $300 million. In its upcoming quarter, the REIT plans to invest in three hospitals in Colombia for $100 million in addition to other developments. This will bring its total acquisitions for the year to an impressive $3 billion.
Despite its large portfolio of acquisitions, MPW’s still maintains a strong liquidity position of $1.25 billion in cash. This will enable MPW to make more acquisitions in the years ahead. The returns from these investments will translate to a higher dividend yield for investors.
Conclusion
It’s been a challenging year for high-yield investments across the board but MPW has proven to be one of the most corona-proof REITs on the market today.
MPW managed to collected most of its rent payments as hospitals remained a safe tenant during tough times. The cash flow allowed MPW to sustain a high dividend yield of 5.75% while acquiring additional properties.
Given the volatility in the markets today, MPW is a great investment while prices remain low. The REIT shows a lot of upside and could be the winning ticket in your portfolio this year.
