This beaten-down ultra-high-yielding dividend stock finally poses its biggest problem of the past. Is it time to buy?

Medical Property Trust (MPW 16.18%) he fought a dam of problems of the last two years. The biggest problem was the financial problems of its top tenant, Steward Health Care.

The bankrupt hospital owner struggled to pay the rent, which is one of the factors which forced the real estate investment trust (REIT) to cut its dividend twice in the past two years. Even with these deep discounts, the REIT still offers a dividend yield of more than 6% because of the nearly 80% crash in its share price since its peak a few years ago.

The Healthcare REIT recently reached o major milestone in its efforts to replace Steward with financially stronger tenants. As a result, the REIT will have much more visibility into its future cash flow and ability to make pay dividends.

The great substitute

Medical Properties Trust has reached a global settlement agreement with Steward Health Care, its secured creditors and the committee of unsecured creditors. The agreement restores REITs control of its real estate, terminates its relationship with Steward and facilitates the immediate transition of operations to replacement tenants of 15 hospitals. The deal covers a total of 23 hospitals, and the REIT is working to find alternative solutions for the remaining ones.

The REIT has reached new agreements with four tenants that will immediately lease and operate 15 hospitals in Arizona, Florida, Louisiana, Ohio and Texas. The deals value the property at $2 billion. They will provide Medical Properties Trust with $160 million in annual cash rent payments upon stabilization at the end of 2026, which is approximately 95% of the rent that Steward would have owed for these properties at that time.

New leases have an initial average term of 18 years. Assuming these tenants remain financially sound, rental contracts will provide the REIT with very stable rental income for nearly two decades.

Medical Properties Trust has agreed to give up the leases on these properties for the remainder of this year to expedite the re-leasing process and give the new operators time to get up to speed. In addition, when the lease payments start next year, they will start out low and gradually escalate. New tenants will only pay around 50% of the contract rental rate until the end of next year, which will continue to rise until the end of 2026, when they will reach 100% of the contract rate.

There is still a lot left on the to-do list

Finding new tenants for 15 hospitals previously leased to Steward is an important step forward for Medical Properties Trust. Those chords secure it with visibility into its future rental income streams from those facilities.

However, the REIT still has several things to work through before returning to a more sustainable footing in the long term. He is still working out solutions for two hospital construction projects he had financed for Steward. In addition, Steward had closed four facilities before filing for bankruptcy, while two others had recently closed due to the uncertainty of the lawsuit.

Those closed facilities had a rental base of $300 million. REIT is also in the discussions about solutions for these properties, which could include re-leasing the facilities or selling the property.

In addition to completing the exit from Steward, the REIT must take additional steps to shore up its financial foundation. It has sold non-Steward properties in recent years to build liquidity to be able to repay the debt as it falls due.

While it has made excellent progress on this strategy this year (it has raised over $2.5 billion, surpassing its $2 billion target), it has more work to do. For example, it has yet to monetize its investment in the managed care business of Prospect Medical Holdings, another financially challenged tenant. That sale would allow the REIT to recoup more of its investment in the properties leased to that tenant.

Once shores Above its financial foundation, the REIT can refocus on increasing shareholder value. This would include making increased new investments and increasing the dividend.

A major step forward

Medical Properties Trust has finally put its relationship with Steward in the past. This gives it much more clarity on its future cash flow. Although the REIT has more work to do, it has done most of the heavy lifting. Because of this, it is starting to become attractive to income-seeking investors.

Its current dividend level is much more sustainable and could rise substantially through 2026 as the REIT collects full leases on its former Steward facilities. While more risk-averse investors may want to wait a while before buying for even more clarity, those with a higher risk tolerance could stand to gain totally strong it bounces back from here if things keep going in the right direction.