Prosper Junior Bakiny, The Motley Fool

Tue, Jun 24, 2025, 12:34 PM5 min read

• Medical Properties Trust's dividend cut was a necessary evil considering the headwinds it faced.

• Since then, the company has made significant moves to improve its business.

• MPT's revenue could start growing again next year, along with its dividend.

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Dividend investors loathe payout cuts, but sometimes they are necessary for a corporation facing significant headwinds to get back on track. Take Medical Properties Trust (NYSE: MPW), a healthcare-focused real estate investment trust (REIT). The company has struggled over the past two years due to tenant-related issues. It had to cut its dividends twice as a result. However, MPT has made significant strides in the right direction, and the company may soon resume raising its dividends. Here's the rundown.

The REIT business seems somewhat stable. These companies operate real estate properties that they rent out to businesses, collecting regular and consistent rental income. Easy enough. REITs in the healthcare sector can appear even more reliable, as medical care remains in high demand regardless of economic conditions. However, even health-focused businesses can encounter issues and go bankrupt. That's what happened to two of MPT's former tenants, including one that was, at some point, its largest. The company's financial results took a significant hit. It hasn't recovered yet. MPT's revenue is still moving in the wrong direction.

But the comeback has already begun. MPT found multiple new tenants to occupy most of the facilities formerly rented out by its then-largest client that went bankrupt. Among other things, that means the company's portfolio is now more diversified. One or two tenants going out of business is unlikely to affect MPT as much as it did last time. The new contracts it signed with its new renters have an average lease of 18 years. Regular rental income for almost two decades provides MPT with some security, provided, of course, these new tenants don't go out of business, too. While that could certainly happen, these moves make the company far more stable than it was when its troubles first started.

MPT's quarterly dividend per share went from $0.29 to $0.15 to $0.08 in less than two years. Not only was it dealing with rapidly declining revenue, but it also had pressing financial obligations that needed to be addressed.

MPT has worked to solve both problems. The company's new tenants aren't paying the full rental amount due -- at least not yet. They began doing so only in the first quarter, and they are currently paying only a fraction of it.