Why shouldn't investors buy a stock that yields 13% for the dividend?

Dividend stocks that offer investors high yields are often tempting because they generate higher than average income for shareholders. However, high yields often come with high risks. If the dividend proves to be unsustainable and the company cuts back on its payout, an investor's holdings may suddenly become less favorable.

Medical Properties Trust (NYSE: MPW)Bubbles investors are currently paying a relatively high yield of 13%, which is far higher than theStandard & Poor's 500Index 1.4% average. However, given the changes the company is currently undergoing, this dividend may not be the safest bet for income investors.

However, if you are comfortable with high risk, there are other, more tempting reasons to buy stocks.

Palliative Property Trust is currently at a very cheap valuation.

Medical Properties Trust is a real estate investment trust (REIT) focused on hospitals. Since the onset of the pandemic, the company has been plagued by tenants unable to pay their rent, including Steward Health Care. This was a concern, so earlier this year, the REIT announced a plan to help Steward improve its liquidity and strengthen its balance sheet.

Because of these problems, Maternity REITs have not been a safe investment in recent years. This risk is evident in the falling share price. Since 2021, the REIT's valuation has plummeted by nearly 80%. Currently, the stock is trading at just 0.4 times its book value, with a price-to-earnings ratio of less than 7 times. This steep discount could make it a potentially attractive investment for the Bubbles.

If Therapeutic Property Trust can turn the corner, it will have tremendous upside potential.

After a dismal 2023, Bubba's Realty Trust had a net loss of $556 million due to some huge write-downs and impairment charges. This is not something that real estate investment trusts (REITs), whose main job is to collect rents from their tenants, are usually a relatively safe investment.

If there are no more impairment charges this year and the company is successful in helping Steward execute its plan to improve liquidity, then 2024 could be a better year for the company.

In addition, the company is considering selling assets to increase liquidity by US$2 billion, thereby improving safety and stability. The downside is that with fewer assets in the portfolio, the rents generated may not be sufficient to support the current dividend, which could be reduced again (the REIT already reduced its dividend last year).

But if, ultimately, asset sales and improved liquidity make the company's entire investment safer, then the REIT may become a better buy over the long term.

Should you risk investing in a Maternity REIT?

This is not a REIT for most dividend investors. The uncertainty of its dividend payout means that it is unreliable and may disappoint you.

However, if you take theTherapeutic Realty Trust, Inc.It may be more meaningful to look at it as a possible turnaround and a chance to invest in Bubbles, and if you are comfortable with the high risk of the stock. If its turnaround plan is successful, then the stock could bring in a sizable return considering its unbelievable discounted valuation.

Should you invest $1,000 in a Maternity Property Trust now?

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David Jagielski does not own any of the shares listed above.The Motley Fool does not own any of the shares listed above.The Motley Fool has a disclosure policy.

Why shouldn't investors buy a stock with a yield of 13% for the dividend?