Why Are Hedge Funds Bullish on Medical Properties Trust, Inc. (MPW) Right Now? - InvestingChannel

Why Are Hedge Funds Bullish on Medical Properties Trust, Inc. (MPW) Right Now?

We recently compiled a list of the 7 Dividend Stocks with 10%+ Yield. In this article, we are going to take a look at where Medical Properties Trust, Inc. (NYSE:MPW) stands against the other dividend stocks with 10%+ yield.

Dividend stocks have kept their appeal among investors due to the steady yields and income they provide. However, in the past year or so, all eyes have been on anything related to artificial intelligence. These stocks have not only surged but have also lifted the overall market much higher compared to dividend-paying stocks. Nevertheless, tech stocks have also joined the dividend game, unable to resist the trend as several major companies began distributing dividends starting in 2024. This highlights the financial strength of these companies, as they generate more cash than they currently need to reinvest.

Despite the lower yields on these tech stocks, their dividend payouts are punching above their weight contributing to the overall payments made by companies in the broader market. According to a report by S&P Dow Jones Indices, in the second quarter of 2024, companies listed in the index collectively paid out $153.4 billion in dividends, marking an increase from $151.6 billion in the previous quarter and up from $143.2 billion in the same period last year. The report highlighted that Alphabet’s dividend initiation contributed $9.3 billion to the Q2 2024 increase, while initiations from Brookings, Meta Platforms, and Salesforce in Q1 2024 accounted for $7.2 billion, collectively making up 53% of the S&P 500’s year-to-date dividend gain. Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, said that although the gains without the new initiations are expected to achieve a record dividend payment for 2024, their ongoing commitment to dividend payouts will notably boost the total payout, prompting investors and boards that do not currently pay dividends to reassess their strategies.

Dividend investors often debate between dividend yields and dividend growth, not fully realizing that dividend yield is crucial for sustained dividend growth. For instance, in the case of the Dividend Aristocrats Index, which has raised dividends for 25 consecutive years, maintaining a high yield hasn’t been at the expense of growth. Over the past 26 years ending in 2023, the index consistently outperformed its benchmark with higher yields, typically ranging between 2% and 2.9%. On average, the index boasted a yield of 2.5%, significantly higher than the market average of 1.8%, according to a report by S&P Dow Jones Indices. To learn more about high-yield stocks, read Very High Yield Dividend Stocks With Upside Potential.

However, it’s worth noting that high dividend yields aren’t always the most practical choice. Analysts generally suggest targeting dividend yields in the range of 3% to 6%, as this range typically offers potential for both dividend growth and appreciation in stock value. In one of its reports, an Illinois-based financial planning company, Nuveen, highlighted that global companies with moderate dividend yields (between 0% and 3%) tend to demonstrate stronger earnings growth, profitability, and profit margins compared to those with higher yields or those that don’t pay dividends at all. These factors also contribute to reducing risk, particularly during periods of market volatility.

The debate between these two strategies appears endless. We believe that combining growth and yields can present better results for investors. How investors navigate yield traps ultimately depends on their caution and strategy. With that, let’s take a look at some of the best dividend stocks with over 10% yield.

Our Methodology:

For this list, we used a stock screener and selected dividend stocks with yields above 10%, as of July 16. Among those stocks, we chose companies that have relatively stable dividend histories, however, a lot of the companies on the list don’t have a consistent record of paying dividends due to their exceptionally high yields. They either stopped or reduced their dividend payments in 2020 due to the pandemic or because they were facing financial difficulties. We’ve also mentioned the hedge fund sentiment for each stock using Insider Monkey’s Q1 2024 database. The stocks are ranked in ascending order of their dividend yields, as of July 16.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).

A real estate CEO pointing to a hospital facility on a financial chart.

Medical Properties Trust, Inc. (NYSE:MPW)

Dividend Yield as of July 16: 12.74%

Medical Properties Trust, Inc. (NYSE:MPW) is an American real estate investment trust company, headquartered in Alabama. The company mainly invests in healthcare facilities. The stock is down by over 5% since the start of 2024 due to issues surrounding high interest rates and its tenants. In early January, the REIT disclosed that its main tenant, Steward Health Care, was unable to resume full rental payments despite selling a noncore business in the fourth quarter. Steward was still struggling financially, leading the REIT to defer more rent and collaborate on a long-term solution. A few months later, Steward filed for bankruptcy protection, and the company agreed to provide $75 million in debtor-in-possession financing to help Steward continue its operations. This issue is causing problems for the company’s already sensitive dividend, which was slashed last year after a decade of consecutive growth.

Despite the challenges, analysts see potential in the stock. The bankruptcy of its tenant, although a current issue, presents a possible upside. Medical Properties Trust, Inc. (NYSE:MPW) plans to find new tenants for the hospitals Steward operates, which would allow the company to resume collecting full rental income from those properties. Additionally, they could sell these properties to new operators or financial investors. In addition, the company’s dividend is more stable than it seems. Its cash flow is strong, with trailing twelve-month operating cash flow and free cash flow of $444.4 million and $882.1 million, respectively. The company also reported a positive FFO of $0.24 in the first quarter of 2024.

Medical Properties Trust, Inc. (NYSE:MPW), one of the best dividend stocks, offers a quarterly dividend of $0.15 per share. The stock supports an impressive dividend yield of 12.74%, as of July 16.

Insider Monkey’s database of Q1 2024 indicated that 18 hedge funds held stakes in Medical Properties Trust, Inc. (NYSE:MPW), worth nearly $81 million in total. Silver Point Capital owned the largest stake in the company at the end of the quarter.

Overall MPW ranks 2nd on our list of the best dividend stocks to buy with 10%+ yield. You can visit 7 Dividend Stocks with 10%+ Yield to see the other dividend stocks that are on hedge funds’ radar. While we acknowledge the potential of MPW as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than MPW but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.

 

READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and 10 Best of Breed Stocks to Buy For The Third Quarter of 2024 According to Bank of America.

 

Disclosure: None. This article is originally published at Insider Monkey.

Related posts

Advisors in Focus- January 6, 2021

Gavin Maguire

Advisors in Focus- February 15, 2021

Gavin Maguire

Advisors in Focus- February 22, 2021

Gavin Maguire

Advisors in Focus- February 28, 2021

Gavin Maguire

Advisors in Focus- March 18, 2021

Gavin Maguire

Advisors in Focus- March 21, 2021

Gavin Maguire