A Tale Of Two Healthcare REITS: Why You May Want To Consider The Lower Dividend Option

When choosing between two REITs, many investors might opt for whichever one is paying a higher dividend. While this philosophy is understandable, sometimes the REIT with the lower dividend is still worth considering. Looking closer at Medical Properties Trust and Healthpeak Properties sheds light on why reflexively opting for the higher dividend may not be to your advantage.

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Medical Properties Trust (NYSE: MPW) is a real estate investment trust (REIT) focused on one medical real estate industry sector: healthcare facilities. MPW delivers returns to investors through income earned on financing, building, and renovating healthcare facilities. Although most of MPW's facilities are in the United States, its portfolio includes assets in the European Union and the United Kingdom.

According to its website, MPW has over 436 assets with 43,000 beds in its portfolio. Their shares are trading at $4.75, and Benzinga estimates their market cap at $2.86 billion. Benzinga also estimates MPW's current dividend to be a solid 13.72%. However, the current share price of $4.75 translates to roughly $0.65 per share in annual dividend yield. A deeper look under the hood reveals other risks.

Their shares have also been trending downward since hitting a year-to-date high of around $6.50 in May. One likely culprit for the dip was that MPW's largest tenant, Steward Health, went bankrupt. Shares fell into the $3.90 range in early July before rallying somewhat to the current price of $4.75. Although some investors believe there is an upside here, it's worth noting that MPW cut its dividend last year and has not raised it since. 

Healthpeak Properties Inc. (NYSE: DOC) is a healthcare REIT like MPW, but Healthpeak focuses on a different industry sector. Healthpeak owns and operates a 748-property portfolio of diverse medical assets, such as medical offices and life science facilities. Benzinga estimates Healthpeak's market cap at $14.45 billion and a share price of $20.66. According to Benzinga's most recent estimates, Healthpeak's current dividend is 5.84%.

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First, that's a respectable annual dividend of $1.20 per share (based on the current $20.66 share price). Second, Healthpeak's dividend history shows they haven't cut dividend yields since Q4 of 2020. That doesn't mean they won't ever cut dividends again, but recent history would suggest that investors might want to consider Healthpeak regarding dividend yield.

Another consideration is Healthpeak's upward trend in share price. Healthpeak's current stock price means it has almost doubled in value since hitting a low in the $10.90 range in February. Since then, it has rallied quite impressively to its current price of $20.75.

The disparity in share price between Healthpeak and MPW means you would need to buy two shares of MPW to draw the same dividend yield as one Healthpeak share, assuming MPW doesn't cut dividends any further. That is, of course, assuming that MPW doesn't cut their dividend yield further. On the other hand, there is always the chance that MPW could announce that it had a huge quarter and raise its dividend.

Which investment looks better to you comes down to several variables, such as how much capital you have to invest, your investment goals, and your risk tolerance. However, if it's dividends and passive income you're looking for, taking a deeper look at these two REITs reveals why the dividend yield is not necessarily your only consideration in deciding where to invest.

 Looking For Higher-Yield Opportunities?

The current high-interest-rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through dividend stocks… Certain private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities and Benzinga has identified some of the most attractive options for you to consider. 

For instance, the Ascent Income Fund from EquityMultiple targets stable income from senior commercial real estate debt positions and has a historical distribution yield of 12.1% backed by real assets. With payment priority and flexible liquidity options, the Ascent Income Fund is a cornerstone investment vehicle for income-focused investors. First-time investors with EquityMultiple can now invest in the Ascent Income Fund with a reduced minimum of just $5,000.

Don't miss out on this opportunity to take advantage of high-yield investments while rates are high. Check out Benzinga's favorite high-yield offerings. 

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