Medical Properties Trust (NYSE: MPW) has battled a seemingly never-ending barrage of headwinds in recent years. Tenant troubles and balance sheet issues have weighed heavily on the real estate investment trust’s (REIT) stock price. Shares currently sit more than 80% below their peak in 2020, when the pandemic started causing trouble for its hospital tenants.
The healthcare REIT has battled back against its issues. It has replaced troubled tenants with financially stronger ones and sold several assets to shore up its financial position. Because of that, it’s getting healthier.
That’s why I recently bought more shares of the high-yielding REIT. I believe it’s about to start recovering, which will put its high-yielding dividend on a more sustainable foundation.
The bulk of Medical Properties Trust’s issues stem from its overexposure to two tenants: Steward Health Care and Prospect Medical Holdings. At the end of 2022, more than 35% of its revenue came from these two tenants. That became highly problematic when they couldn’t pay their rent.
At first, Medical Properties Trust tried to work with those troubled tenants by providing additional financial assistance and restructuring its investment. However, their financial problems only grew worse, with Steward ultimately filing for bankruptcy.
The REIT was able to sever its relationship with Steward earlier this year, which allowed it to lease many of the properties tied to that tenant to new operators. It has also been working to reduce its exposure to Prospect. The company recently agreed to sell its interest in its managed care business in a deal that will bring in $200 million in cash. It also recently made a move to take back control of three healthcare entities in Southern California by seeking to replace board members with those designated by the REIT after Prospect defaulted on its debt and stopped paying rent on its properties again.
Its lingering issues with Prospect aside, Medical Properties Trust has significantly enhanced its portfolio and balance sheet over the past couple of years. It has…
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