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Medical Properties Trust (NYSE: MPW) arguably ranks as one of the most controversial stocks on the market right now. Wall Street is split nearly equally down the middle on the stock after more than 18 months of turbulence.

There’s one thing that’s not controversial about Medical Properties Trust, though: It offers one of the juiciest dividends you’ll find. Is right now the perfect time to buy this 9.4%-yielding dividend stock?

Catching a falling knife?

A good case can be made that buying Medical Properties Trust now would violate the investing axiom to “never try to catch a falling knife.” The real estate investment trust (REIT) stock has plunged close to 37% so far this year, with no clear signs of a rebound.

We don’t have to look hard to identify the sources of Medical Properties Trust’s woes. At the top of the list: Some of the REIT’s tenants — all of them hospital operators — have faced serious financial challenges. For example, Pipeline Health went through Chapter 11 bankruptcy reorganization. Prospect Medical remains behind on paying rent on its California facilities and was recently hit by a ransomware attack.

Soaring interest rates have also rattled investors. Medical Properties Trust reported net debt of more than $10.2 billion at the end of the second quarter. While the company’s debt matures over a multiyear period, higher interest rates led to concerns about the increased costs of refinancing.

These factors raised questions about how safe Medical Properties Trust’s dividend was. The REIT ultimately answered those questions last month, slashing its dividend payout by nearly 50%.

Several reasons for optimism

Despite all this bleak news, there are actually several reasons for optimism about Medical Properties Trust. For one thing, further dividend cuts seem highly unlikely. The company’s lower dividend level reflects a payout of less than 60% of projected near-term adjusted funds from operations (FFO).

Medical Properties Trust also plans to explore other ways to deleverage. It’s looking at potential refinancing, sales of assets (including non-real estate assets), and joint ventures that could help reduce debt.

The company has already announced two transactions that are expected to be finalized later this year that will help on this front. Medical Properties Trust is selling its Connecticut hospitals to Yale New Haven Health for around $355 million. It is also selling the remaining hospitals in its Australian portfolio for roughly $300 million.

Investors worried about Medical Properties Trust’s participation in a financing deal involving seven lenders for its top tenant, Steward, also should rest more easily. Last month, the REIT sold $105 million of its interest in the asset-backed credit facility to a global asset manager.

Last, but certainly not least, the financial outlook for hospital operators is improving. Medical Properties Trust’s tenants are seeing average rate increases of between 3% and 6%. Aging populations in the U.S. and Europe should drive increased demand for hospital services in the coming years.

Perfect time to buy?

So is now the perfect time to buy this beaten-down REIT stock? I wouldn’t go that far.

It’s not great that Medical Properties Trust must focus so much on debt reduction. Investing in the stock would also require less hesitation if Prospect was in a position to resume paying full rent.

Medical Properties Trust hasn’t been a good pick for risk-averse investors in quite a while — and still isn’t. The REIT definitely continues to face several key risks.

However, it’s fair to say that Medical Properties Trust isn’t as risky now as it has been in the past. The company is in better financial shape to pay down debt thanks to its dividend cut and asset sales.

The stock currently trades at only 4.1 times the midpoint of Medical Properties Trust’s normalized FFO guidance for 2023. That’s bargain-basement territory.

The REIT’s dividend yield also remains attractive, even after the steep cut. That’s especially the case considering the argument put forward earlier that another reduction isn’t likely.

Now isn’t the perfect time to buy Medical Properties Trust shares. The dynamics for the company could certainly be better. However, for aggressive investors willing to be patient, now could be a good time to buy the stock.

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Keith Speights has positions in Medical Properties Trust. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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