Two words come to mind when I think about Medical Properties Trust (NYSE: MPW) — dumpster fire. And I’m not kidding.

Shares of the healthcare real estate investment trust (REIT) have plunged more than 75% over the last 12 months. The stock is down more than 85% from its high set in early 2022. Every time it seemed as if maybe, just maybe, things were about to get better, Medical Properties Trust (MPT) had more bad news.

The conventional wisdom is that investors should avoid Medical Properties Trust like the plague. But the conventional wisdom isn’t always right.

Could buying this beaten-down stock be a smart move right now? Here are three arguments in favor of buying Medical Properties Trust’s stock.

1. Duh, the dividend

There’s one obvious reason to at least consider buying this REIT: Its dividend yield stands at close to 18%. If the company keeps the dividend at the current level, the REIT could deliver a fantastic total return just by treading water. But is Medical Properties Trust’s dividend sustainable? Investors have reason to be cautiously optimistic.

When the company provided an update on Steward Health Care earlier this month, it noted that completely removing all revenue received from the top tenant would have reduced third-quarter adjusted funds from operations (AFFO) by $0.11 per diluted share. This hypothetical scenario would result in an AFFO dividend payout ratio in the high 70% range — a manageable level.

However, it’s important to keep in mind that’s a worst-case scenario. The REIT doesn’t expect all of the contributions made by Steward-related investments to evaporate. After all, the hospital operator is continuing to make partial rent payments.

2. Improving market dynamics

It’s possible that Medical Properties Trust’s shares could sink even more and more than offset the impact of its juicy dividend. One factor that just might prevent this from happening, though, is the improving market dynamics.

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The Federal Reserve has indicated that multiple interest-rate cuts could be on the way in 2024, and REITs are highly sensitive to interest rates. Lower rates reduce their borrowing costs and therefore boost earnings. Medical Properties Trust’s tenants would also benefit from interest-rate cuts.

Good news for the overall economy can help, too. Inflation is moderating, and unemployment levels remain low. These factors tend to help most businesses, including hospital operators that lease properties from the company.

3. Potential for good news specific to Medical Properties Trust

The REIT has had more bad news than a down-and-out country song over the last couple of years. However, the potential exists for good news from the company — and perhaps relatively soon.

Let’s start with Steward. The big hospital operator hopes to sell some of its hospital operations or find new tenants and plans to divest non-core operations. Steward also is looking for a capital partner for its managed-care business. Positive developments on one or more of these fronts would likely improve Steward’s ability to pay what it owes to Medical Properties Trust.

Another major tenant, Prospect, is expected to sell its managed-care business this year. Completion of this anticipated transaction would provide a financial windfall to the REIT.

“Smart” isn’t the right word

Is buying Medical Properties Trust stock a smart move right now? I wouldn’t go that far — at least not for most investors. The REIT’s business remains highly risky, and there’s a real chance that its share price could continue to fall.

That said, aggressive investors could view Medical Properties Trust as an intriguing pick. The worst may be finally over for the battered REIT, and its super-high dividend yield provides a cushion, assuming no dividend cuts are in store.

“Smart” isn’t the right word to describe buying this REIT at this point. Perhaps the better description is “an aggressive calculated bet.” That bet could go up in flames if the stock remains a dumpster fire. However, it just might pay off handsomely.

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Keith Speights has positions in Medical Properties Trust. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Could Buying 18%-Yielding Dividend Stock Medical Properties Trust Be a Smart Move Right Now? was originally published by The Motley Fool