Medical Properties Trust: 11.26% Yield – The Risk is Priced In

Contribution from Professor Nathan Mauck

Summary Medical Properties Trust

  • Medical Properties Trust’s dividend at the 2022 rate of $1.16 is safe even if Prospect, its third-largest operator, does not pay a single cent in 2023.
  • The overexposure to Steward is being addressed with definitive actions, lowering it from 30% to 24% of its total annual revenue.
  • Medical Properties Trust’s balance sheet will be shored up by the end of 1H 2023, bringing its cash and cash equivalent to among the highest level in its entire history in existence.
  • Medical Properties Trust is so undervalued right now that the downside is limited, while the upside is far greater.

Medical Properties Trust’s ideal role in Income portfolios is to provide a stable stream of income. The primary concern should be the safety of this income stream, and less so about price appreciation. In fact, if the income is safe, a lower share price means investors can buy more shares to increase their dividend income. Besides studying MPW from the point of view of an Income Investor, we are examining Medical Properties Trust through the eyes of a Value Investor to determine if it is truly a bargain or is it a value trap. Lastly, we hope to determine if investing in MPW is a case of “Heads, I win. Tails, I do not lose much“, an investment philosophy advocated by Monish Pabrai known as Dhandho, which is an approach to business that seeks to minimize risk while maximizing reward.