Clearly, one of the most important things dividend investors need to consider when choosing a stock is its yield. While you likely want a dividend that pays better than the S&P 500 average of 2%, you also need to be careful not to choose a yield so high that it's not safe.
Unfortunately, there's no magic percentage that counts as "too high" in every circumstance, but I typically consider anything over 5% to be worth investigating a bit further. One stock that meets that criterion today is Medical Properties Trust (NYSE: MPW), which pays investors 5.8% on an annual basis. That's far better than the S&P 500 average, but is the payout safe, and should investors expect dividend increases? Let's take a closer look to find out and see whether the stock is worth adding to your portfolio today.
Medical Properties is a real estate investment trust (REIT), which means that the company needs to pay out more than 90% of its earnings to shareholders. Obviously, that means a payout ratio over 90% is not necessarily a cause for alarm. But investors still need to consider whether the company's financials are truly strong; just because a company is a REIT doesn't automatically mean that its dividend is safe.