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Medical Properties Trust, Inc. (NYSE:MPW) is about to trade ex-dividend in the next 4 days. Investors can purchase shares before the 12th of June in order to be eligible for this dividend, which will be paid on the 11th of July.
Medical Properties Trust’s next dividend payment will be US$0.25 per share, on the back of last year when the company paid a total of US$1.00 to shareholders. Based on the last year’s worth of payments, Medical Properties Trust has a trailing yield of 5.5% on the current stock price of $18.11. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Its dividend payout ratio is 78% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth We’d be concerned if earnings began to decline. A useful secondary check can be to evaluate whether Medical Properties Trust generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (82%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
It’s encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don’t drop precipitously.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That’s why it’s comforting to see Medical Properties Trust’s earnings have been skyrocketing, up 36% per annum for the past five years.
The company is paying out more than three-quarters of its earnings, but it is also generating strong earnings growth. We’d also point out that Medical Properties Trust issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus – perpetually pushing a boulder uphill.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Medical Properties Trust has increased its dividend at approximately 2.3% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Medical Properties Trust is keeping back more of its profits to grow the business.
Is Medical Properties Trust an attractive dividend stock, or better left on the shelf? It’s good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That’s why we’re glad to see Medical Properties Trust’s earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow – 78% and 82% respectively. In summary, it’s hard to get excited about Medical Properties Trust from a dividend perspective.
Ever wonder what the future holds for Medical Properties Trust? See what the seven analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn’t recommend just buying the first dividend stock you see, though. Here’s a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.