If a dividend inventory has minimize its payout, traders is perhaps tempted to assume that it will not scale back it once more for some time. In spite of everything, the corporate would need to keep away from making such a unfavourable announcement as soon as, not to mention twice.
And if it has to scale back its dividend a number of instances inside a brief interval, that may be an indication that it would not have an excellent grasp of simply how sturdy its monetary outcomes shall be sooner or later.
That is what occurred lately with Medical Properties Belief (NYSE: MPW). The true property funding belief (REIT) introduced that it will be decreasing its dividend but once more. The inventory nonetheless pays traders a excessive dividend, however can they depend on the payout and belief that it is going to be protected?
Medical Properties’ dividend is down 72% in roughly a 12 months
It was August of 2023 when Medical Properties Belief introduced that it will be decreasing its quarterly dividend from $0.29 to $0.15 in mild of points with its tenants, together with a very troubled one in Steward Well being, which recently filed for bankruptcy protection.
However now in 2024, the REIT has minimize its quarterly dividend but once more, to simply $0.08. The corporate’s annual dividend fee of $0.32 is now only a few cents greater than what it was paying its traders just a few years in the past each quarter.
The brand new dividend, nevertheless, implies that traders are nonetheless incomes a reasonably excessive yield. Based mostly on its closing share worth of $6.37 final week, the yield is simply over 5%, which stays far greater than the S&P 500 common of 1.3%.
Previously, the REIT’s yield was above 10%, which is generally an indication of bother; if it have been protected, traders can be aggressively shopping for up a dividend stock with such a excessive payout.
Does the decrease yield make the inventory a safer purchase?
Medical Properties Belief remains to be paying a comparatively excessive dividend, however the largest danger isn’t figuring out what lies forward for the corporate. The REIT has been promoting off property so as to enhance liquidity. And it’s transitioning properties away from Steward Well being and onto new operators, which ought to present it with a bit extra stability.
However till traders know simply how a lot funds from operations (FFO) the REIT goes to be producing on a constant foundation, it is going to be arduous to know whether or not the present dividend is protected and sustainable, or if it would nonetheless be too excessive.
Whereas it may appear unlikely to count on a third minimize to the payout, traders ought to brace for something at this level given how risky the enterprise has been lately. Over the primary six months of 2024, the corporate reported an FFO lack of $869.5 million versus a revenue of $525.9 million throughout the identical interval final 12 months.
Do you have to take an opportunity on Medical Properties Belief inventory?
Shares of the REIT are up round 30% in simply the previous month on the information of the corporate transferring away from Steward Well being, even regardless of the seemingly unhealthy information of yet one more dividend minimize. There’s clearly some optimism that the corporate would possibly lastly be on a optimistic observe. And whereas that is perhaps true, my concern is that it is nonetheless something however a assure how the enterprise will carry out and the way protected the brand new tenants will show to be.
And with so many different dividend shares on the market that present comparable yields with out practically as a lot danger, I simply do not see a compelling purpose to even trouble with Medical Properties Belief proper now given its uncertainty. I’d put the inventory on a watch record and monitor the way it does in future quarters to see if it will possibly get again to producing optimistic FFO, however till it does, I would not critically think about shopping for shares of the REIT.
Do you have to make investments $1,000 in Medical Properties Belief proper now?
Before you purchase inventory in Medical Properties Belief, think about this:
The Motley Idiot Inventory Advisor analyst crew simply recognized what they imagine are the 10 best stocks for traders to purchase now… and Medical Properties Belief wasn’t certainly one of them. The ten shares that made the minimize may produce monster returns within the coming years.
Contemplate when Nvidia made this record on April 15, 2005… in the event you invested $1,000 on the time of our advice, you’d have $708,348!*
Inventory Advisor gives traders with an easy-to-follow blueprint for fulfillment, together with steering on constructing a portfolio, common updates from analysts, and two new inventory picks every month. The Inventory Advisor service has greater than quadrupled the return of S&P 500 since 2002*.
*Inventory Advisor returns as of September 16, 2024
David Jagielski has no place in any of the shares talked about. The Motley Idiot has no place in any of the shares talked about. The Motley Idiot has a disclosure policy.
This High-Yielding Dividend Stock Just Cut Its Payout for a 2nd Time in a Year was initially printed by The Motley Idiot
