Investors seeking appealing dividends often find turnaround opportunities compelling. However, these turnarounds can be classified as high-risk or low-risk. Medical Properties Trust (MPW 0.34%) falls into the high-risk category, while Prologis (PLD 0.57%) and Rexford Industrial (REXR -0.41%) are considered low-risk. This suggests that Medical Properties Trust might be best avoided, while Prologis and Rexford warrant further analysis.
The Decline of Medical Properties Trust’s Dividend
Medical Properties Trust is a real estate investment trust (REIT) focused on hospitals. Its quarterly dividend plummeted from $0.29 per share in mid-2023 to $0.15 by year-end, and further declined to $0.08 in the latter half of 2024. This represents a staggering 72% reduction from previous levels.
Image source: Getty Images.
The primary issue for Medical Properties Trust was that many of its major tenants faced financial challenges, making it difficult for them to pay rent. This resulted in a drop in rental income, forcing the REIT to cut its dividend.
Prologis and Rexford’s Stronger Recovery Prospects
Given Medical Properties Trust’s high 7.2% dividend yield, it may not appeal to conservative dividend investors. In contrast, Prologis and Rexford offer lower yields of 3.8% and 4.7%, respectively, but these are still among their higher historical yields.
Currently, the primary challenges for Prologis and Rexford are more emotional than operational. Both industrial REITs focus on warehouses in key shipping areas and have been negatively affected by geopolitical tensions and tariff concerns. While this investor reaction may be understandable, it may overlook the long-term demand for strategic warehouse locations.
Prologis presents a less risky option, with a globally diversified portfolio across major transport hubs. Meanwhile, Rexford is riskier, being concentrated in Southern California, which is a supply-constrained market and tends to retain strong pricing power for rent. This region is also crucial for Asian imports to the U.S.
In the first quarter of 2025, Prologis increased its rent by over 30%, while Rexford’s rent surged nearly 15%. These figures indicate that both companies remain strong performers, despite current stock market avoidance. Therefore, once tariff issues stabilize, these stocks may attract higher valuations compared to Medical Properties Trust, which is still addressing substantial operational problems.
Be Cautious in Choosing Risks
While a high yield can be appealing, the situation of Medical Properties Trust illustrates that risks may not be justified. Conversely, Prologis and Rexford present solid opportunities due to emotionally driven market reactions. Over the next three years, it appears more prudent for investors to opt for these lower-yielding options rather than riskier stocks like Medical Properties Trust.
Reuben Gregg Brewer does not hold positions in any of the mentioned stocks. The Motley Fool has investments in and recommends Prologis and suggests the following options: long January 2026 $90 calls on Prologis. For more details, refer to the Motley Fool’s disclosure policy.
