To The Moon

$Medical Properties(MPW)$

MPW Stock Update: A Wild Ride

MPW stock has been on an absolute tear—up 46% while the broader market is declining. Last year, when the market was rising, MPW was down 40-50%. It’s been a rollercoaster, so I’m doing an update to share my thoughts on whether the stock is approaching overvalued territory or if it’s still a solid opportunity. I’ll also break down the key factors driving this surge.

I know some of you have commented about my stock picks, saying you lost money on MPW. As I’ve mentioned before, this stock moves inversely with the 10-year Treasury yield—it has a negative 80% correlation. When interest rates go down, MPW goes up. Why? Because MPW is a dividend stock, and as yields drop, its dividend becomes more attractive. However, the company also carries a lot of debt, which is another reason rate movements impact its price.

Fundamentals

Looking at the fundamentals, MPW owns 396 properties—primarily healthcare facilities—across nine countries with 39,000 beds. The company has faced challenges, particularly with Steward Health, which went bankrupt. While that was a concern, I saw it as a fresh start for MPW, eliminating risk from Steward. However, another major tenant, Prospect Medical, recently filed for bankruptcy as well. The good news? Prospect represents only 4.8% of MPW’s assets, far less than Steward’s peak exposure of 23%. While they aren’t collecting rent from Prospect, MPW is working to reclaim and lease out those properties, similar to what they did with Steward, with rent collection expected to resume in 2026.

Financially, MPW has been selling assets to pay down debt. Their debt maturities are well-structured, with most not due until 2035. That gives them a long runway, but they still have significant obligations:

• $1.1 billion due in 2024

• $2 billion due in 2025

• $1.6 billion due in 2026

Given this, I don’t expect a dividend increase anytime soon. The current dividend is 5.3% (8 cents per quarter, 32 cents annualized), which is well-covered by their Adjusted Funds from Operations (AFFO) per share of 47 cents.

Overall, MPW has made progress, selling assets, reducing debt, and restructuring its balance sheet. I’ll continue to monitor the stock’s valuation and broader market trends to assess whether it remains a good opportunity. Stay tuned for more updates!

MPW’s Financial Recovery: A Path to Stability

Medical Properties Trust (MPW) has faced significant financial challenges in recent years. The bankruptcies of two major tenants, combined with rising interest rates, placed immense pressure on its cash flow and balance sheet. As a result, the healthcare-focused real estate investment trust (REIT) had to take decisive action to restore its financial health.

While MPW has not fully recovered, it is in a much stronger position than before. Over the past year, the company has completed $5.5 billion in transactions, significantly improving its financial outlook. This has made its 6.7% dividend yield appear much more sustainable.

Securing $5.5 Billion in Liquidity

At the start of last year, MPW set a goal of raising at least $2 billion in additional liquidity to manage its upcoming debt maturities. Due to financial instability among its largest tenants and higher interest rates, refinancing at favorable terms was not an option.

To generate cash, the REIT initially focused on selling properties leased to financially stable tenants. In February, MPW sold five properties to Prime Healthcare for $350 million. This was followed by a 75% stake sale in a Utah hospital portfolio to a joint venture partner in April, which brought in $1.1 billion. The proceeds from these transactions helped MPW repay maturing debt.

These asset sales eased some of the pressure on MPW’s balance sheet, allowing it to refinance other outstanding debt. In May, the company secured an $800 million 10-year loan, backed by 27 of its 36 U.K. hospitals, at a 6.9% fixed interest rate. This loan enabled MPW to refinance debt set to mature in late 2024 and early 2025 at more manageable terms.

Further strengthening its liquidity, MPW raised:

• $1.5 billion through a senior secured note offering due in 2032 at an 8.5% interest rate

• €1 billion (about $1 billion) through another senior secured note offering with the same maturity, but a lower 7% rate

These new notes will allow MPW to refinance debt maturing through 2026.

A Stronger Financial Position

In total, MPW has secured $5.5 billion in additional liquidity, ensuring it can fully repay all debt maturing through 2025. Additionally, the company now has $1.4 billion in cash and credit line availability, providing further financial flexibility.

While challenges remain, MPW has made substantial progress in stabilizing its balance sheet, making its dividend much more secure than before.

MPW Dividend & Valuation Update

MPW’s dividend payout currently stands at 32 cents per share, supported by 47 cents in Adjusted Funds from Operations (AFFO) per share. This figure is expected to improve to 56 cents per share as the company begins collecting rent from newly leased properties, primarily those previously associated with Steward. By 2026, MPW’s financial outlook should look significantly better.

I believe the 5.1% dividend yield (8 cents per quarter) is safe for now, but I wouldn’t anticipate a dividend increase in the near term due to the company’s ongoing debt reduction efforts. That said, the current payout remains well-covered and stable.

Valuation Metrics

A widely used metric for valuing REITs is the Price-to-AFFO ratio, which currently sits at nearly 13x. Historically, MPW’s average multiple has been 11.6x, suggesting the stock is now trading at a premium compared to its historical valuation.

Another key valuation approach is tangible book value per share—this metric strips away intangibles like goodwill and branding, focusing solely on hard assets minus debt. MPW’s tangible book value per share is estimated at $7.50, while the stock is currently trading at $6.02. This means MPW is still undervalued relative to its liquidation value, with over $1 per share in potential upside if it were to trade at 1x tangible book value.

Historically, MPW has traded around 1.2x tangible book value, which would imply a fair value of approximately $8.80 per share—over 45% upside from current levels. While the stock remains a solid opportunity, the upside isn’t as compelling as when it was trading in the $3-$4 range.

Key Risks & Market Conditions

While MPW remains undervalued, broader market conditions should be considered. Many high-quality stocks like Google and others are also declining, potentially offering alternative investment opportunities. Additionally, if inflation picks up and the 10-year Treasury yield starts rising again, MPW could decline due to its negative 80% correlation with interest rates—the same inverse relationship that drove the stock down last year when yields surged to 5-5.2%.

Conclusion

I still believe MPW is undervalued, and its dividend remains secure, but the reward potential at this price isn’t as strong as before.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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