This Beaten-Down Ultra-High-Yield Dividend Stock Is Finally Putting Its Biggest Problem in the Past. Is it Time to Buy?
Medical Property Fund (NYSE: MPW) He fought a battle. A shower of The facility has had a number of problems over the past two years. The biggest problem has been the financial problems of its largest tenant, Steward Healthcare.
bankrupt hospital owner He had trouble paying the rent, It is one of the factors Which has forced the REIT to cut its dividend twice in the past two years. Even with those deep cuts, the REIT still offers a dividend yield of more than 6% as its share price collapses nearly 80% from its peak a few years ago.
the Healthcare Real Estate Investment Trust I recently arrived at major A major achievement in its efforts to replace Steward with financially stronger tenants. As a result, the REIT will have much greater visibility into its future cash flows and ability to Pay dividends.
The Great Alternative
Medical Properties Trust has reached a global settlement agreement with Steward Health Care, its secured lenders and a committee of unsecured creditors. The deal restores Real Estate Investment Funds The agreement calls for the real estate investment company to take control of its properties, sever its relationship with Steward, and facilitate the immediate transfer of operations to alternative tenants in 15 hospitals. The agreement covers 23 hospitals in total, and the real estate investment company is working to find alternative solutions for the remaining hospitals.
The real estate investment firm has reached new agreements with four tenants that will immediately lease and operate 15 hospitals in Arizona, Florida, Louisiana, Ohio and Texas. The properties are valued at $2 billion. They will provide Medical Properties Trust with $160 million in annual cash lease payments upon settlement in late 2026, representing approximately 95% of the rent Steward owed on the properties at that time.
The average initial term of new leases is 18 years. Assuming these tenants remain in good financial health, Leases The Real Estate Investment Fund will provide: very Stable rental income for nearly two decades.
Medical Properties Trust has agreed to waive rent on these properties for the rest of this year to expedite the re-leasing process and give new operators time to ramp up. Furthermore, when rent payments begin next year, they will start low and gradually ramp up. New tenants will only pay about 50% of the contracted rent by the end of next year, which will continue to ramp up through the end of 2026 when they reach 100% of the contracted rent.
There is a lot left on the to-do list.
Finding new tenants for the 15 hospitals previously leased to Steward is a significant step forward for Medical Properties Trust. Provide it Clear visibility into future rental income from these facilities.
However, the REIT still has several issues to address before it can return to a more sustainable long-term footing. It is still working on two hospital construction projects it was financing for Steward. In addition, Steward closed four facilities before declaring bankruptcy, while two others recently closed due to uncertainty about the process.
The lease base for those closed facilities was $300 million. The REIT is also In discussions about Solutions for these properties, which may include re-leasing facilities or selling the properties.
In addition to completing its exit from Steward, the real estate investment company needs to take additional steps to shore up its financial foundation. It has been selling non-Steward properties in recent years to build liquidity. So he can do that Paying debts when due.
While the company has made excellent progress executing on this strategy this year (it raised more than $2.5 billion, surpassing its $2 billion target), it still has work to do. For example, the company still needs to monetize its investment in Prospect Medical Holdings, another financially challenged tenant, the managed-care business. The sale would allow the company to recoup more of its investment in the tenant’s leased properties.
Once he reached the beach higher With its financial foundation in place, a REIT can refocus on growing shareholder value. This includes making profitable new investments and increasing its dividend.
A big step forward
Medical Properties Trust has finally put its relationship with Steward in the past. This gives it greater clarity on its future cash flows. While the real estate investment company has more work to do, it has done most of the hard work. Because of this, it is starting to attract income-seeking investors.
Its current earnings level is more sustainable and could grow significantly by 2026 as the REIT raises funds. Full Rent on its former facilities. While more risk-averse investors may want to wait a while before buying for more clarity, those with a higher risk tolerance may gain Strong total He’ll be back from here if things continue to go right.
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Matt Delallo The Motley Fool owns shares in Medical Properties Trust. The Motley Fool does not own shares in any of the stocks mentioned. The Motley Fool owns shares in Medical Properties Trust. Disclosure Policy.
This extremely high-yielding, hard-hit stock is finally getting rid of its biggest problem. Is it time to buy? Originally posted by The Motley Fool
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