Month-to-month Dividend Inventory In Focus: EPR Properties

Up to date on March 2nd, 2023 by Quinn Mohammed

Actual property and dividend shares are two of the preferred autos for creating passive retirement revenue.

The draw back to proudly owning rental properties is that it isn’t actually passive. Any landlord who has needed to name a plumber or an electrician through the nighttime can attest to this.

For buyers seeking to seize the returns of the true property sector whereas benefiting from the hands-off strategy of dividend shares, actual property funding trusts – or REITs – are a really enticing funding car.

EPR Properties (EPR) is without doubt one of the most well-known REITs. EPR reinstated its month-to-month dividend within the second half of 2021, after suspending it for over a 12 months as a result of coronavirus pandemic.

Meaning EPR rejoined the checklist of month-to-month dividend shares. We’ve compiled an inventory of fifty month-to-month dividend shares, together with essential monetary metrics like dividend yields and payout ratios, which you’ll be able to view by clicking on the hyperlink under:

This text will analyze the funding prospects of EPR Properties intimately.

Enterprise Overview

EPR Properties is a triple web lease actual property funding belief that focuses on leisure, recreation, and schooling properties.

Triple web lease signifies that the tenant is chargeable for paying the three essential prices related to actual property: taxes, insurance coverage, and upkeep. Working as a triple web lease REIT reduces the working bills of EPR Properties.

EPR has recognized leisure, recreation, and schooling, respectively, as its three massive buckets wherein it invests. It has then recognized enticing sub-segments of these bigger segments together with film theaters, ski resorts, and constitution faculties, as examples.

The portfolio consists of greater than $6.7 billion in investments throughout 363 places in 44 states and Canada, together with over 200 tenants.

Supply: Investor Presentation

EPR is concentrated in quite a lot of completely different metropolitan areas all through the US and components of Canada, so it’s extremely diversified with not solely its tenants, however geographically as effectively.

EPR reported This autumn and FY 2022 outcomes on February twenty second, 2023. The belief reported fourth quarter FFO per share of $1.27, which was $0.09 forward of expectations. Income was $179 million, which was 15% increased year-over-year.

EPR acknowledged that it can not present steering for this 12 months as a result of one in every of its greatest tenants, Regal, is in chapter procedures. EPR did point out that it had obtained all deliberate lease and deferral funds from Regal to this point, but additionally famous the inherent threat for EPR.

Progress Prospects

Previous to 2020, EPR had maintained a observe report of regular development. From 2010 to 2019, EPR compounded its adjusted FFO-per-share by nearly 8% per 12 months. The coronavirus pandemic upended just about all REITs and brought about EPR’s FFO-per-share to say no from $5.44 in 2019 to $1.43 in 2020.

Though the corporate confronted main challenges through the pandemic, which confirmed within the firm’s monetary outcomes, EPR continues to get well strongly. EPR nonetheless has many alternatives to drive its development. The corporate’s concentrate on experiential properties protects the corporate in opposition to e-commerce threats. EPR believes that customers will nonetheless need these experiences and thus its properties will generate sturdy visitors.

The corporate believes there’s a powerful future development potential in location-based leisure. And nonetheless, that there are a number of underpenetrated experiential segments in experiential actual property. The corporate believes there’s a $100 billion+ addressable market alternative there.

EPR has determined to scale back its schooling portfolio, whereas rising most of its property varieties in its experiential portfolio. EPR will concentrate on rising all property varieties in its experiential portfolio, aside from theatres. The corporate desires to scale back its dependence on theatres, which account for 41% of annualized adjusted EBITDAre throughout 172 properties with 19 operators.

Supply: Investor Presentation

General, we anticipate 2% annual FFO-per-share development over the subsequent 5 years. EPR’s development can be fueled by its aggressive benefits, which is primarily its portfolio of specialised properties. EPR has methodically recognized essentially the most worthwhile properties by way of years of expertise and focuses its investments in these areas.

Aggressive Benefit & Recession Efficiency

The corporate’s concentrate on experiential properties provides it a aggressive benefit by defending it in opposition to e-commerce threats. EPR believes that its properties will nonetheless generate sturdy visitors, as shoppers will nonetheless need these experiences.

The corporate actually isn’t resistant to recessions, however we see EPR as one of many better-run REITs in our protection universe as a result of its enterprise mannequin and benefits. A return to development ought to enable the corporate to slowly elevate the dividend over time.

Dividend Evaluation

EPR’s dividend historical past was spectacular heading into 2020. The corporate had elevated its annual per-share dividend by roughly 6% per 12 months from 2010-2019. After all, the pandemic pressured the corporate to droop its dividend for many of 2020.

Thankfully, EPR administration expects its restoration to proceed. This expectation gave administration the boldness to extend the month-to-month dividend 10% to a fee of $0.275 per share in March 2022. This equals an annual dividend of $3.30.

On an annualized foundation, the $3.30 per share dividend remains to be under the pre-COVID payout of $4.59 per share. Nonetheless, at a stage of $3.30 per share, EPR inventory yields 8.1%. Subsequently, EPR inventory remains to be enticing for revenue buyers as a excessive dividend inventory.

EPR has a fairly leveraged capital construction that affords it some flexibility. It has labored to restore its steadiness sheet within the wake of the pandemic, to additional enhance its dividend security and development potential.

Supply: Investor Presentation

EPR’s debt totals about $2.8 billion, with a weighted common debt maturity of 5.3 years and a weighted common rate of interest of 4.3%. It has a $1 billion credit score revolver that now has a zero steadiness, giving EPR loads of liquidity.

All of this helps EPR’s development plans and by extension, its capability to not solely pay its dividend, but additionally to hopefully elevate it over time.

EPR’s dividend seems to be safe, and it’s seemingly the belief will proceed to lift it at significant charges over time if its FFO continues to get well again to pre-COVID ranges. This makes the inventory enticing for these searching for present revenue and dividend development.

Ultimate Ideas

EPR Properties seems to be to be performing very effectively following the pandemic and continues to get well strongly into 2023.

The REIT has a dominant place within the possession of film theaters, leisure amenities, and academic properties.

These are comparatively small sub-segments of the true property business and provides EPR the good thing about being ‘an enormous fish in a small pond.’

EPR Properties inventory has an 8.1% dividend yield and has resumed its month-to-month dividend funds. Because of this, it’s as soon as once more an interesting inventory for revenue buyers in search of excessive yields and month-to-month payouts.

After all, that is depending on the continued restoration in EPR’s portfolio metrics and monetary outcomes. Based mostly on all these elements, EPR Properties seems to be a sensible choice for revenue buyers, or buyers which are in search of some publicity to high-yield REITs.

If you’re serious about discovering extra high-quality dividend development shares appropriate for long-term funding, the next Certain Dividend databases can be helpful:

The foremost home inventory market indices are one other stable useful resource for locating funding concepts. Certain Dividend compiles the next inventory market databases and updates them month-to-month: