1 Dividend Stock Yielding 6% to Buy and Hold

Prosper Junior Bakiny, The Motley Fool

Sat, May 3, 2025, 8:17 AM 4 min read

• Medical Properties Trust encountered severe problems in recent years.

• However, the REIT has made significant progress in putting those issues behind it.

• Its stock's juicy yield looks pretty safe.

The past three years have been a roller-coaster ride for Medical Properties Trust (NYSE: MPW), a healthcare-focused real estate investment trust (REIT). The company encountered significant headwinds that negatively affected its financial results and stock price.

However, MPT has made considerable headway in putting those issues behind it. As things stand, the stock's 6% yield looks relatively safe, at least for investors willing to stay the course. Here's why.

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Income-focused investors often view REITs as stable options because of the regular, predictable rental income they receive from tenant companies. However, REITs are only as safe as the businesses they lease to. When some of their tenants suffer financially, they do too.

That's what happened to MPT. Over the past three years, two of its tenants -- including its (now) former largest -- filed for bankruptcy. MPT's rentals and funds from operations (FFO) dropped. The company had no choice but to cut its dividend.

Income seekers don't like to see a payout cut, but it was a necessary evil for MPT to improve its business. Facing the loss of its largest tenant and substantial financial troubles, the company managed to craft a comeback plan. It sold some properties to raise money while finding new tenants for others that were previously occupied by its former tenants, who had declared bankruptcy.

MPT also strengthened its balance sheet and improved its financial flexibility. It used the proceeds from the sale of various facilities and other sources to pay down significant amounts of debt, totaling $2.2 billion since the beginning of 2023. The company addressed all debt maturities through 2026, and also refinanced existing debt.

All these transactions give MPT a much stronger financial foundation. That's not to mention the fact that, by putting several new tenants in old facilities, it has significantly diversified its operations; it's now far less susceptible to serious financial trouble because of the shortcomings of just one or two tenants.

MPT still isn't getting the full rental revenue from its newest tenants. They'll gradually increase the amount they pay until they match 100% of the agreed terms by the fourth quarter of next year. In other words, it will still take some time for revenue and FFO to improve significantly. But I don't foresee the company encountering more serious issues and having to cut its dividend again.