Medical Properties Trust: Fundamentals Support A Higher Valuation For This High-Yield REIT

Medical Properties Trust (MPW)

I originally posted a video covering the hospital REIT Medical Properties Trust on February 17, 2023, when the price was $12.96. On February 28, 2023, I did a follow-up update video after the price had fallen to $8.72. In both of those videos, I suggested that the fundamentals supported a higher valuation. Nevertheless, the stock price fell to as low as $7.10 and now trades at $7.88.

As a result, the most common question I receive from subscribers is do I still like Medical Properties Trust? Additionally, the second most common question I get is can I please do another update on MPW? This has been somewhat frustrating because the only thing that I have seen that has changed materially is the price. From a fundamental point of view, things have actually improved but that has not shown up in the company’s valuation.

As a value investor that believes in investing in great businesses at valuations (prices) that are at least equal to but preferably below the intrinsic value of that business, I have not trusted stock prices, especially short-term prices. Businesses take time to generate value for their shareholders and that time is measured in years, in business cycles, not weeks or months.

Therefore, I would argue that not enough time has passed to make a judgment on whether (or not) MPW is or has been a good investment or not. Thus far, the company has maintained its dividend and fundamentals indicate that it is well covered. But since the stock price has fallen so precipitously, the yield has ballooned to a one-time over 15% and currently sits at about 14%.