Shares of Medical Properties Trust (NYSE: MPW) were soaring 10.9% higher as of 10:59 a.m. ET on Thursday. This marked the second consecutive day of solid gains for the stock after the Federal Reserve indicated that interest rate cuts could be on the way next year.
Granted, this week’s rebound doesn’t come anywhere close to offsetting Medical Properties Trust’s year-to-date decline of close to 50%. However, it’s certainly welcome news for shareholders of the beaten-down stock.
Why investors are reconsidering Medical Properties Trust
There’s a straightforward reason investors are now taking another look at Medical Properties Trust. The company is organized as a real estate investment trust (REIT). REITs are especially sensitive to interest rate moves. When rates go up, their costs of borrowing can increase, thereby impacting earnings and growth. When rates come down, borrowing costs can fall, boosting earnings and opening up opportunities for more robust growth.
It’s also important to understand the dynamics between REITs and bonds. Both are top investment alternatives for income investors. When interest rates decline, bond yields also decline. That makes bonds less attractive to income investors and can make REIT stocks, such as Medical Properties Trust, more appealing.
Is Medical Properties Trust stock a buy?
Risk-averse investors will probably still want to avoid Medical Properties Trust for now. The healthcare REIT isn’t out of the woods yet. Its hospital operator tenants continue to face financial challenges. There’s also no guarantee the Fed will deliver the highly anticipated rate cuts in 2024.
However, I think Medical Properties Trust is a stock for more aggressive investors seeking income to consider seriously. Its dividend yield of nearly 10.9% is alluring. The company’s dividend appears relatively safe after the big cut earlier this year. It’s possible (and perhaps even likely) that the worst is over for Medical Properties Trust. If so, the stock could have plenty of room to run over the next few years.
Should you invest $1,000 in Medical Properties Trust right now?
Before you buy stock in Medical Properties Trust, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Medical Properties Trust wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of December 11, 2023
Why Medical Properties Trust Stock Is Soaring Today was originally published by The Motley Fool