Why Omega Healthcare and LTC Properties Are Safer, Higher-Yield Picks Than Medical Properties Trust in Post-Pandemic Healthcare REITs

The healthcare REIT sector has faced significant turbulence since the pandemic, with tenant defaults, occupancy declines, and shifting regulatory landscapes testing the resilience of even the most established players. Medical Properties Trust (MPW), once a dividend stalwart, now stands as a cautionary tale of overexposure to vulnerable tenants and deteriorating fundamentals. Meanwhile, rivals Omega Healthcare Investors (OHI) and LTC Properties (LTC) have demonstrated superior balance sheet strength, diversified portfolios, and the ability to sustain payouts through crises. For income investors seeking both safety and yield in healthcare real estate, the case for shifting allocations from MPW to OHI and LTC is compelling—and supported by stark contrasts in dividend sustainability, FFO trends, and sector positioning.

MPW's Dividend Dilemma: A Yield Luring Investors Into Risky Waters

MPW currently offers a 7.2% dividend yield, higher than OHI's 7.4% and LTC's 6.5%. But this “yield trap” comes with serious risks. The company's Funds from Operations (FFO) have collapsed since 2022, with trailing twelve-month (TTM) FFO per share sinking to -$0.46 as of March 2025, compared to OHI's $2.95–$3.01 FFO guidance for 2025 and LTC's full-year 2025 Core FFO target of $2.65–$2.69 per share.

Key Takeaway: MPW's FFO has been in freefall, while OHI and LTC maintain positive trajectories.

The root cause lies in MPW's overreliance on financially troubled tenants. Its portfolio remains heavily exposed to for-profit skilled-nursing facilities, which face headwinds from Medicare/Medicaid reimbursement cuts and labor shortages. Recent impairments and a net loss of $1.23 per share in Q1 2025 underscore the fragility of its business model. Investors chasing MPW's dividend are likely to be disappointed: its payout ratio (dividends relative to FFO) has turned negative, and analysts warn of further cuts if FFO doesn't rebound—a dubious prospect given its debt-heavy balance sheet.

OHI: A Dividend Machine with Diversified Resilience

Omega Healthcare Investors (OHI) offers a stark contrast. Its 7.4% yield is backed by a $221 million Q1 2025 AFFO ($0.75 per share), up 10% year-over-year, and full-year guidance of $2.95–$3.01 per share. OHI's strength stems from its diversified tenant base and strategic investments in senior housing and post-acute care facilities.

• Tenant Diversification: OHI's top five tenants account for just 26% of its portfolio, reducing exposure to single-tenant defaults. Contrast this with MPW, where Genesis Healthcare (a major tenant) has repeatedly delayed rent payments.
• Growth Pipeline: OHI has deployed $423 million in new investments through April 2025, focusing on high-demand sectors like behavioral health and hospice care.
• Balance Sheet Fortitude: Its debt-to-EBITDA ratio of 5.1x is manageable, and liquidity remains robust.

OHI's ability to raise dividends while navigating tenant challenges—such as Genesis' partial rent nonpayment—proves its operational flexibility. Investors can expect steady income growth here, with minimal risk of cuts.

LTC: Stability in Senior Housing and SHOP Innovations

LTC Properties (LTC), with its 6.5% yield, combines dividend reliability with exposure to the booming senior housing market. Its Q1 2025 Core FFO of $0.65 per share (up from $0.64 in 2024) reflects disciplined portfolio management. Key strengths include:

• SHOP Strategy: LTC is transitioning 13 properties into its SHOP (Senior Housing Operating Partnership) platform, which uses the RIDEA structure to share operational risks with partners. This has boosted liquidity to $681 million, with a conservative debt-to-EBITDA ratio of 4.3x.
• Tenant Stability: LTC's leases are predominantly with operators like Welltower and Five Star Senior Living, which have stronger balance sheets than MPW's tenants.
• Growth Catalysts: Its SHOP portfolio is projected to generate $9.4–$10.3 million in NOI in 2025, supporting FFO growth.

While LTC's yield is slightly lower than MPW's, its ability to grow dividends while MPW's stagnate makes it the safer choice.

The Investment Case: Shift to OHI/LTC for Safer Income Growth

For income investors, the calculus is clear:
- Avoid MPW unless you're willing to bet on a turnaround that requires tenant recoveries and FFO rebounds—both of which lack credibility given its current trajectory.
- Prioritize OHI and LTC, which offer comparable or higher yields with:
- Stronger Balance Sheets: Both have manageable leverage and ample liquidity.
- Diversified Tenants: Reducing exposure to single-tenant risks.
- Structural Growth: Via senior housing and specialized care segments.

Visualization shows LTC's consistent growth versus MPW's decline.

Conclusion: Safety and Yield Aren't Mutually Exclusive—Choose Both

In a sector still recovering from pandemic shocks, safety and yield shouldn't be trade-offs. Omega Healthcare and LTC Properties offer investors a rare combination: dividend reliability, exposure to resilient subsectors (senior housing, post-acute care), and balance sheets capable of withstanding tenant volatility. Medical Properties Trust, meanwhile, represents a high-risk gamble on a turnaround that may never materialize.

For conservative income investors, reallocating to OHI and LTC makes sense. Their FFO trajectories, diversified portfolios, and proven resilience in crises position them as the safer, higher-yield picks in healthcare REITs—without the MPW-style pitfalls.

Investment Thesis: Buy OHI and LTC; Avoid MPW until its FFO recovers sustainably.