They're few and far between but I do believe I found a new addition to my "Divi-X" 'Play of the Week' index. I do not make these decisions lightly for any new addition to the 'Play of the Week' index dilutes the overall return of the index because the returns are then averaged over more securities. In the case of Medical Properties Trust, it dragged the index down 2.75% from 25.42% to 22.67%.
Medical Properties Trust, Inc. crossed my radar from my Twitter feed letting me know it had recently raised it's dividend. After a few preliminary checks, I actually liked what I saw. After further due diligence, I decided that I liked it enough to add to the 'Play of the Week' index.
Company Profile - Medical Properties Trust, Inc. (MPW)
Medical Properties Trust, Inc. is a self-advised real estate investment trust (REIT) focused on investing in and owning net-leased healthcare facilities. It conducts all of its business through MPT Operating Partnership, L.P. It acquires and develops healthcare facilities and leases the facilities to healthcare operating companies under long-term net leases. It also makes mortgage loans to healthcare operators collateralized by their real estate assets. The Company's portfolio consists of 202 properties, which includes 179 facilities that the Company owns and 14 properties controlled in the form of mortgage loans. The properties are leased/mortgaged to 29 tenants located in 28 states, and Germany, United Kingdom, Italy, and Spain. Of the total portfolio, 9 facilities are under development. Its facilities consist of 64 general acute care hospitals, 69 inpatient rehabilitation hospitals, 23 long-term acute care hospitals, 43 free standing emergency rooms, and 3 medical office buildings. (Source: Google Finance)
The Last Five Years
The Leverage Projection Worksheet
If we had invested $10,000 in Medical Properties Trust, Inc. five years ago, here is what the 'Leverage Projection Worksheet' would have looked like.
On Feb. 17, 2012, our 'BUY' price would have been $9.76/share and our dividend yield would have been 8.20%. Based on a margin rate of 7.75%, a "PmtPerc" of 1.25%, and a "Multiplier Pick" of 65, "Divi-X would have afforded us a very impressive 1842.75 shares of (MPW).
Now because of the high dividend yield, we would have taken a more conservative approach and only leveraged in at 44.40% of the total purchase, which is still quite high, but easily doable with a steady dividend..
Returns To Date
And after five short years, here's what our results would have looked like (dividends not reinvested):
A few things to note about this chart:
- "Divi-X" maintained its lead over 'All Cash' for the entirety of the five year period.
- As of close, Feb. 17, 2017, "Divi-X" sits at a sizable 41.72%% advantage over MPW 'Without "Divi-X" for an average annual 8.34% outperformance over someone who just used cash five years ago.
Translation in Dollars
At no point over the last five years would you have doubled your money without the help of "Divi-X." If you had used "Divi-X," you would have crossed that milestone on seven separate occasions.
Since Dec. 2016, to date, "Divi-X" remains above the "double your money" threshold.
Medical Properties Trust vs the S&P 500
I probably will not do this for every article but since it is a 'Play of the Week' selection, I thought I would add a different perspective. It would make sense that if an investment model fails to perform better than the most common indexes, then why even bother with it at all? I mean, why not just put all your money into an index fund that mirrors the Dow or the S&P and let a money manager worry about your portfolio? And you would be absolutely right. Who needs the headache?
Above is a comparison chart of Medical Properties Trust, Inc. compared to two popular index funds that mirror the S&P 500;
Now, for a look at our dividend picture.
Immediately, in year one, "Divi-X" had a 0.66% yield advantage over 'Without.' Over the last five years, that yield advantage has continued to widen. After five years, that yield advantage now sits at 4.71% over 'Without' and will continue to widen year, after year, after year.
If you are reading this article and scratching your head, it's because you haven't learned our very simple system.
Running Leverage Rate
The "Divi-X" System Workbook monitors one's 'Running Leverage Rate' to keep the user aware of if and when a deteriorating share price increases an investor's risk level beyond their acceptable risk tolerance level.
Everything looks fantastic here. Our loan balance is on a steady decline and our leverage ratio, or 'Levered Percentage' is outpacing the decline in our loan balance. Exactly what you want to see.
Taking a New Position
Leverage Projection Worksheet
- We're lowering our "Multiplier Pick" because of the higher than normal dividend which still allows us to pick up an extra 489.47 shares for a grand total of 1245.33.
- My margin rate has increased to 8.25%.
- I'm still maintaining my usual 1.25% "PmtPerc."
And finally, our dividend picture:
Looks like our "Divi-X" yield will be trailing into 2018 unless there is an unexpected dividend increase. However, in 2019, we expect that "Divi-X" will take the lead in yield whether Medical Properties Trust, Inc. increases their dividend or not and, as always, our yield spread will continue to widen year, after year, after year.
Medical Properties Trust, Inc. is now a permanent member of the 'Play of the Week' index and I'll be following it daily with updates to you from time to time. In full disclosure, I may be adding this to my own portfolio soon depending on market behavior over the next few days. Till next time, many happy returns!
Authored by Lee Carroll Wentker
All screen captures are taken from 'The "Divi-X" System Workbook'
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The security showcased here is for learning purposes only. It is not a recommendation or an endorsement of any kind. Do your own due diligence before making any investment.
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