Account Information

  • My Account

    Manage all your subscriptions, update your address, email preferences and change your password.

  • Help Center

    Get answers to common service questions, ask the analyst or contact our customer service department.

  • My Stock Talk Profile

    Update your stock talk name and/or picture.


Collect this extra money immediately!

Collect this extra money immediately!This unique income-boosting opportunity allows you to collect up to $1,003 a month in extra government cash. This plan is available to everyone over the age of 18. And because of the way the government views the money that comes from it, your current—or future—Social Security benefits won’t be affected. There’s still time to get your name on the next check run. I’ll show you how here.


Obamacare the REIT Way

By Todd Johnson on December 24, 2012

Low US interest rates and the Patient Protection and Affordable Care Act, aka Obamacare, are likely to make health care Real Estate Investment Trusts (REITs) a very good place to be in 2013.

Starting January 2013, US hospitals will be increasingly scrutinized on how well they serve and heal their patients. Under Obamacare, for example, Medicare payments will be gradually reduced to those hospitals that are weak on key outcome metrics, such as the level of re-admisions per patient for the same medical condition.

What’s more, Obamacare will mean some 30 million more Americans will be newly insured and thus more likely to seek hospital services. And at the same time, the US population is aging, as more of the Baby Boomers enter their 60s.

This means that out of the 5,000 US hospitals, more will need to invest in personnel, technology and equipment in order to put patient care first while becoming more cost-efficient.

Southern Hospital-ity

Enter Medical Properties Trust (NYSE: MPW). Based in Birmingham, Ala., MPW buys healthcare facilities and leases them back to the former owners. This is an increasingly popular way for medical providers—and especially hospitals—to fund things such as technology and staff upgrades, while lowering their overall operating costs. In some instances, MPW actually builds the facilities and recovers its investment through long-term leases.

MPW currently owns some 80 facilities worth more than $2 billion and leased to 21 different hospital-operating companies in 24 states. Its largest concentration is in the NY/NJ metro area, Texas and southern California.

As a REIT, MPW pays out at least 90 percent of its earnings to shareholders in order to avoid taxes. At the current rate (20 cents per share quarterly), MPW shares yield 7 percent—considerably more than the 6 percent of the typical healthcare REIT and the 4 percent of regular REITs.

We do not see the MPW’s payout as being at risk. In fact, it should rise from here due to continued acquisitions. For the first nine months of 2012, MPW invested some $780 million in purchases.

Many of the REIT leaseback deals have returns of around 10 percent, are “triple-net” leases (the lessor pays for maintenance and insurance) and they allow for annual inflation increases. 

In general, healthcare REITs are perceived as being riskier because of their lack of diversification and outlook being tied to the financial health of the medical providers.

However, any changes that affect the profitability of the providers are not likely to have a material impact on healthcare REITS, unless the problems are so severe that they cause a default. MPW’s clients are well-established hospital operators, many of them with award-winning facilities.

What’s more, only about 1 percent of US hospitals close in any one year. Most hospitals have been around for decades and have close ties to their communities making closure or relocation unlikely.

MPW also does not fund or own any medical office buildings, outpatient or assisted living facilities, which have traditionally been the focus of healthcare REITs and are more likely to suffer economic downturns.

An added benefit for investors: as a REIT, substantial portion of MPW’s dividend is not taxed because it’s considered a return of capital to investors. In 2012, for example, MPW will pay out 80 cents per share: 47 cents are untaxed as return of capital; 30 cents are taxed as ordinary income; and 3 cents are treated as capital gains.

REIT payouts did not benefit from the Bush-era tax cut on dividend income, which is likely to be phased out. So the tax playing field is likely to be leveled again, and perhaps tipped in favor of REITs, since a big chunk of REIT payouts is considered return of capital.

Growth Chart

MPW is a small stock (market capitalization is just over $1.5 billion). And it is smaller than many of its competitors, such as Health Care REIT (NYSE: HCN). But it has a much higher growth rate.

For the first nine months of 2012, MPW’s funds from operations (FFO) came in at $85.5 million, up 48 percent from the year-earlier period, on revenue of $145 million, up 42 percent. FFO—earnings before depreciation and amortization are deducted—is considered a good measure of a REIT’s near-term payout ability. (See chart, below.)

Source: MPW

In the third quarter, the company reported FFO of $0.25 per share, up from $0.18 a year ago. This was MPW’s second consecutive quarter with FFO growth of more than 35 percent.

Looking ahead, the company expects FFO of $0.90 per share for 2012 and $1.08 for 2013. 

A Clean Bill of Health

Medical Properties Trust has a lot going for it: focused and consistent management, strong growth, few comparable competitors and a target market that’s about to see unprecedented expenditures.

MPW’s price may not have a lot of upside at current levels (near a 52-week high). But with a 7 percent return coming from the payout, just a bit of a price increase in 2013 will get you more than a 10 percent total return.

What do you think of this article? Please post your feedback in the “comments” section below! 

Todd Johnson publishes Dividend Lab, a web site focused on income investing.

You might also enjoy…


Obscure Tax Law Forces This Company to Pay Out 90% of its Profits

A 50-year-old loophole is forcing one company to pay out $9 of every $10 it makes from ironclad contracts with the U.S. Government.

In fact, over the past seven years, it’s made payments ranging from a few dollars… to tens of thousands of dollars… 30 times. Without a single cut! 

Most folks don’t even know this company exists, but the ones that do are making a mint.

Like Ted B., who’s set to receive a check for $1,096 just a few days from now.

Merrill H., a 58-year-old from New York, has collected over $3,385 so far. 

And retirees Beth and Terry P. have raked in $16,555.

I’ve put together a special report that will give you all the details, including simple instructions on how to get your name on the payout list before the next cutoff date.

You can get your copy here.

Stock Talk — Post a comment Comment Guidelines

Our Stock Talk section is reserved for productive dialogue pertaining to the content and portfolio recommendations of this service. We reserve the right to remove any comments we feel do not benefit other readers. If you have a general investment comment not related to this article, please post to our Stock Talk page. If you have a personal question about your subscription or need technical help, please contact our customer service team. And if you have any success stories to share with our analysts, they’re always happy to hear them. Note that we may use your kind words in our promotional materials. Thank you.

You must be logged in to post to Stock Talk OR create an account.

Create a new Investing Daily account

  • - OR -

* Investing Daily will use any information you provide in a manner consistent with our Privacy Policy. Your email address is used for account verification and will remain private.