Medical Properties Trust: A 7% Yielding Stock with Potential Dividend Growth in 2026?

Medical Properties Trust (NYSE: MPW) is a healthcare-focused real estate investment trust (REIT) that has faced significant challenges over the past two years due to tenant-related issues. This has led to two dividend cuts, but the company has made significant progress and may soon resume raising its dividends. The REIT business is relatively stable, as these companies operate real estate properties that they rent out to businesses, collecting regular and consistent rental income. However, even health-focused businesses can encounter issues and go bankrupt, which is what happened to two of MPT's former tenants, including one that was its largest. This has had a significant impact on the company's financial results, and its revenue is still moving in the wrong direction. However, MPT has found multiple new tenants to occupy most of the facilities formerly rented out by its then-largest client that went bankrupt. This has diversified the company's portfolio and made it less vulnerable to the failures of individual tenants. The new contracts it signed with its new renters have an average lease of 18 years, providing regular rental income for almost two decades. MPT's quarterly dividend per share went from $0.29 to $0.15 to $0.08 in less than two years. The company has worked to solve both the declining revenue and financial obligations problems by finding new tenants who are gradually increasing their rent payments to 100% of the due amount by the fourth quarter of 2026. By that time, MPT's revenue should move in the right direction since it expects about $160 million in rental revenue from these facilities. In the first quarter of 2025, the company's revenue declined by 17.5% year over year to $223.8 million. Even assuming that the $223.8 million included 50% of the full rental income it will receive from these new tenants by the fourth quarter of 2026 (it doesn't, the payments will reach 50% by the end of this year), it would still mean that MPT would be adding $80 million in revenue by the end of next year. Adding this to its first-quarter revenue would have led to year-over-year top-line growth of 12% compared to the first quarter of 2024. The company has also improved its balance sheet by selling some facilities to raise money and pay down debt, amounting to $2.2 billion between early 2023 and the end of 2024. The recent moves MPT made, which also included refinancing existing debt, have granted it far more financial flexibility. The stage is set for MPT to start growing its dividend again, with a stable payout program that could start growing again next year and a 7.3% forward yield. In conclusion, while dividend investors may have been disappointed by MPT's dividend cuts in the past, the company has made significant progress and is now in a position to resume raising its dividends. With a stable payout program and a forward yield of 7.3%, MPT is a far more attractive income stock than it was just two years ago. However, it's important to note that the stock is still down by 51% over this period, and investors should consider this before making any investment decisions.