The real estate investment trust offers a high payout but comes with a lot of risk.
Investing in a high-yielding dividend stock can be alluring because you can accumulate a ton more dividend income than you would with a low-yielding stock. One stock that offers an extremely high dividend yield today is Medical Properties Trust (MPW 0.21%), a real estate investment trust (REIT) that invests in hospitals, giving you some good exposure to the healthcare industry.
Medical Properties Trust, or MPT, yields 12.4%, which is more than 8 times what you would get with the average stock on the S&P 500, where the yield is approximately 1.4%. The REIT pays a quarterly dividend of $0.15, or $0.60 over a full year. To generate $1,000 in annual dividend income, you would need to own roughly 1,670 shares of the REIT. And with the stock trading at around $4.80, that means you would need to invest a little more than $8,000 to secure a $1,000 annual dividend.
But MPT did cut its dividend last year, and the company has had problems with one of its key tenants, Steward Health, which filed for bankruptcy protection earlier this year. So, even though MPT’s dividend is lower than a year ago, that doesn’t guarantee it will remain sustainable. Investors are taking a big risk by investing in this stock.
While MPT can provide a high dividend, you’ll want to keep this stock on a close leash, as buying the stock and forgetting about it could prove to be dangerous. Over the past five years, MPT’s total returns are a negative 59%, even when including its high dividend.
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.