So far, I'm not liking what i'm seeing.
First off, the recent dip was because its tow largest tenants which account for approximately 37% of revenue hired advisors to look into debt refinancing. Which means, those two hospitals are struggling to pay the bills, which does not bode well for MPW - not that anything is in immediate danger but its never a good thing when your tenants are having debt issues to the point they had to hire advisors to look into options. That said, one of them did find new financing which should help over the short term.
The company also recently had to sell assets to reduce its own debt load. While it was successful in disposing of 11 Australian hospitals for $800M, it still has $1.4B in refinancing needs in Fiscal 2025. This poses a challenge for the company which doesn't have a strong cash balance, has a high debt load and whos FFO profile seems to be declining - FFO per share dropped by 18.9% in Q1 and distributions payout ratio came in at 96% - which is pretty high. From an AFFO perspective, the payout ratio jumps to 134% which isn't great. On a forward basis...AFFO payout ratio is expected to come in the high 90s and while that is much better, it is still high and there are many factors that could skew this number given the company's current asset sales. In fact, the Australian sale is expected to negatively impact FFO and AFFO, so we'll have to see where it lands. Plenty of uncertainty here.
Even if AFFO comes in below 100%, the ratio is quite high and a 15% yield is not good business practice over the long term. This doesn't necessarily mean a dividend cut is on the way, but it is on the higher side of probability at this point in time. Be cautious.
Mat
Mat