Medical Properties Trust (MPW -0.80%) is a real estate investment trust (REIT) that has been achieving some solid growth over the years. As it has expanded its list of healthcare properties, which center around hospitals and behavioral health facilities, revenue has soared from $785 million in 2018 to more than $1.5 billion just last year.
But this year, the stock has been struggling, losing more than half its value. And now, due to the rapid decline, the REIT’s yield is at more than 10%. Has Medical Properties Trust become an excellent buy, and could investing in this healthcare stock today set you up to eventually become a millionaire?
Where the business is today
As of the end of September, Medical Properties reported having 437 facilities in its portfolio. That’s up only modestly from a year ago, when it had 426. Without a significant increase in the number of properties, and with macroeconomic conditions worse than they were a year ago, perhaps it’s little surprise that the REIT’s growth hasn’t been impressive of late:
But lackluster sales growth isn’t typically a reason for investors to dump a REIT; the recurring cash that its dividend generates normally attracts investors. What’s arguably more important is the safety of the company’s current dividend. And over the past three quarters, Medical Properties has reported funds from operations (FFO) per share of $1.34, which is 54% higher than the dividends it has declared during that time ($0.87).
The business doesn’t appear to be as bad as the recent sell-off suggests. And the catalyst for the decline in the stock price could be due to many short-sellers betting against the stock amid rising interest rates and a worsening economy. This year, the short interest in Medical Properties stock has been soaring:
Is Medical Properties a millionaire-making stock?
If you invested $25,000 into Medical Properties stock, based on its current yield, that could generate about $2,600 in dividend income over the course of an entire year. Multiply that out by 25 years, and you could accumulate $65,000 in dividend income in the long haul.
And if the stock were to double and make up for what has been a disastrous year in 2022, then that could generate another $25,000. Combined with the high dividend, that’s $90,000 in potential dividends and gains on a $25,000 investment over 25 years.
That’s a great return, but even under the favorable assumptions that the dividend remains safe for decades and the stock recovers significantly, it appears evident that you would need to invest far more into the REIT for it to make you a millionaire.
And given the uncertainty in the economy right now and the danger rising interest rates pose to REITs, I wouldn’t suggest investors make a larger, six-figure investment in the stock.
While Medical Properties looks to be a good buy right now and it could be part of a portfolio that helps you get to $1 million, the stock isn’t likely to get you there all on its own without you making a significantly large investment — one that may not be appropriate for most investors.
David Jagielski 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.