The stock market was trading relatively flat on Tuesday morning, but Medical Properties Trust (NYSE: MPW) was a major underperformer. As of 11:45 a.m. ET, the real estate investment trust (REIT) had lost more than 4% following a sharp decline on Monday.
Tuesday’s downward move appears to be a continuation of the fallout from Medical Properties Trusts’ long-anticipated dividend cut and other recent negative news.
On Friday, The Wall Street Journal reported that Medical Properties Trust’s deal to provide financial support to one of its struggling tenants had been put on hold in July by a California regulator — news which wasn’t previously disclosed to investors. If the deal is ultimately blocked by the regulator, that would deal a financial blow to an already delicate Medical Properties Trust. Company management pushed back and said that the hold was standard and expected, and that the deal is still expected to close.
Then on Monday, Medical Properties Trust made a move that had been widely expected by investors for some time — it slashed its dividend nearly in half. The company said that it would explore options to pay down debt (a lingering problem), including selling some of its properties.
For one thing, it’s important to note that even after the dividend cut, at the current share price, Medical Properties Trust still has a dividend yield of nearly 9%. While the company still has some work to do to get back on solid financial footing, the payout cut was certainly a prudent move, and if management can successfully complete the deal with its tenant and reduce its leverage, the healthcare REIT could have a bright future.
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Matthew Frankel, CFP® has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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