You’ve probably wondered if this 13% yielding stock could be a steal of a deal. All that dividend income could be significant. And what if you lose money on the stock — dividend income could help make up for it. Plus, if things go well, the stock could even rise in value, giving you some great returns along with all that dividend income.
This is undoubtedly a great charm when it comes to Medical Properties Trust (NYSE: MPW). The stock pays an extremely high yield of 13%, and it can easily generate $1,000 or more in dividend income for your portfolio. That is, if it can continue to pay its dividend. There is no certainty that it can.
While the stock looks cheap and may appear to have a lot of upside, it also faces significant risk. It is selling assets to boost liquidity, and one of its key tenants recently filed for bankruptcy protection. Forget profits along with dividend income — you could end up with losses and a dividend suspension.
The risk is extremely high with Medical Properties Trust and is not a risk most investors should consider. If you want a stock with lots of upside and high yield, I have a better option for you: Pfizer (NYSE: PFE).
Pfizer’s nearly 6% return is well above average
You won’t get a double-digit return with Pfizer stock, but you can still get a pretty high dividend yield. It currently pays around 5.8%, which is four times higher than the S&P 500 average 1.3%. As a bonus, the stock has also increased its dividend payout in recent years. The stock’s quarterly dividend of $0.42 is 17% higher than the $0.36 it paid investors five years ago.
Some investors are also concerned about Pfizer’s dividend. After all, the company faces some significant headwinds. Some of its drugs are losing patent protection, and Pfizer is also seeing big drops in revenue from its COVID vaccine and pill.
However, in the company’s most recent earnings call in May, management made it abundantly clear that the dividend is a high priority for the business. CFO Dave Denton said “our first priority from a capital allocation perspective is to support and grow our dividend over time, and that’s not at risk.” CEO Albert Burla even referred to the dividend as a “sacred cow.”
These are more than vague and bland statements from management. They look like a firm commitment that the dividend is not only stable, but also likely to increase in the future.
The stock is also cheap and has a lot of upside
If you also crave a stock with plenty of upside potential, then Pfizer has better, more calculated risk than Medical Properties Trust. With Pfizer, you don’t have to worry about tenants paying their bills. Instead, you just need to hope that a healthcare company with a rich history spanning more than 100 years and developing a top-selling COVID vaccine and pill has not suddenly stopped learning how to innovate and bring new products to market.
Pfizer has invested heavily in acquisitions in recent years, most notably its $43 billion purchase of cancer company Seagen. While Pfizer admits its top line could lose as much as $18 million to generics and increased competition in the coming years, it also plans to add $25 billion by 2030. That’s thanks to its acquisition of Seagen and others companies, along with drug development at home.
It’s a lofty goal, but investors don’t seem convinced — hence the stock’s 15% drop in the past 12 months. At just 13 times its estimated forward earnings, Pfizer stock is at a deep discount and could provide investors with terrific upside over the long term, provided its growth strategy pays off.
Pfizer is a better choice for both dividend and growth investors
While Medical Properties Trust may seem like an attractive high-risk, high-reward stock, I think it’s too skewed toward the risk side of that equation to be a viable option for most investors. In contrast, Pfizer is a better stock to buy. There’s risk there, too, but the healthcare giant has a better track record and makes a better, more calculated risk than the real estate investment trust. With a high dividend yield, it can also create a great buy-and-hold income stock.
Should you invest $1,000 in Pfizer right now?
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David Jagielski has no position in any of the listed shares. The Motley Fool has positions and recommends Pfizer. The Motley Fool has one disclosure policy.
Forget the Medical Properties trust: This high-yielding dividend stock is a much better buy originally published by The Motley Fool
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