Global Medical REIT’s Preferred Shares: A High-Yield Opportunity Amid Healthcare Stability?

The healthcare real estate sector has long been a bastion of stability for income investors, offering predictable cash flows through long-term leases and inelastic demand for medical facilities. Global Medical REIT’s 7.5% Series A Preferred Shares (GMRE-PR-A) now present an intriguing entry point, offering a 7.30% dividend yield as of March 2025—well above the broader real estate sector’s average of 4.46%—amid a backdrop of mixed macroeconomic signals and sector-specific risks.

A Fortress of Dividend Stability?

Global Medical REIT’s preferred shares, trading at a $25.20 premium to their $25 liquidation value, benefit from the company’s triple-net lease model, which insulates cash flows from operational volatility. These leases, typically spanning 10–20 years, require tenants to cover property taxes, insurance, and maintenance, leaving the REIT with steady base rent. This structure has supported an unchanged quarterly dividend of $0.4688 per share since 2024, despite a minor dip in occupancy rates to 92.9% (from 94.5% in 2023).

The company’s 2025 AFFO guidance of $0.89–$0.93 per share/unit further underscores dividend resilience, as this metric exceeds the preferred dividend requirement of $1.875 annually by a comfortable margin. However, investors should note that no dividend increases have occurred in recent years, reflecting management’s cautious approach to capital allocation.

A Perpetual Structure with Call Flexibility

The GMRE-PR-A shares are perpetual, meaning they lack a maturity date, but they are callable at the issuer’s discretion post-September 15, 2022. While the company has not redeemed the shares to date, this feature introduces a risk: if interest rates fall sharply, Global Medical may choose to refinance the debt at lower rates, leaving investors to reinvest proceeds at lower yields. Conversely, the current 44.8% leverage ratio and Piotroski F-Score of 6/9 suggest management is prioritizing balance sheet stability over aggressive refinancing.

The shares’ price performance since their 2022 call date has been resilient, rising from $24.50 to $25.45 (as of March 2025), despite broader REIT sector volatility. This signals market confidence in their income profile.

Risks: Healthcare Sector Headwinds and Structural Concerns

While the preferred shares offer compelling income, they are not without risks. The Prospect Medical Group bankruptcy, which accounts for 0.8% of Global Medical’s annualized base rent, highlights sector-specific vulnerabilities. Smaller tenants’ financial struggles could pressure occupancy or rental growth.

Additionally, the preferred shares’ dividend is cumulative, meaning missed payments must be settled before common shareholders receive payouts. While this prioritizes preferred holders, it also underscores reliance on the REIT’s ability to generate consistent cash flows—a challenge in a sector facing regulatory shifts, rising interest rates, and demographic pressures.

Analyst Sentiment: A Mixed Picture

Analyst coverage of Global Medical’s common stock (NYSE: GMRE) has turned bullish in late 2024, with Berenberg and Alliance Global Partners initiating “Buy” recommendations. However, these ratings focus on the common stock’s valuation and growth prospects, not the preferred shares. The preferred stock itself saw only a “Market Perform” reiteration by Citizens Capital Markets in March 2025, reflecting cautious consensus.

The disconnect between common and preferred sentiment is notable. While the common stock trades at a YTD return of 1.19% (vs. the S&P 500’s 10.30%), the preferred shares’ yield remains attractive for income-focused portfolios.

Conclusion: A High-Yield Play for Conservative Income Seekers

Global Medical REIT’s preferred shares offer a rare blend of 7.30% yield stability and exposure to a defensive sector. Their perpetual structure and cumulative dividend protections make them suitable for investors prioritizing income over growth, particularly in an environment of low bond yields.

However, the 44.8% leverage ratio and healthcare sector risks—such as tenant defaults and regulatory changes—demand vigilance. Investors should monitor the Q1 2025 earnings report (May 7, 2025) for updates on occupancy trends and AFFO.

For now, the shares’ premium to par and lack of recent analyst upgrades on the preferred side suggest a cautious approach: allocate a small portion of an income portfolio here, with a focus on the dividend’s safety rather than capital appreciation.

In summary, GMRE-PR-A is a compelling income vehicle for those willing to navigate healthcare sector uncertainties—but tread carefully, and ensure diversification.