Updated July 22, 2021 by Bob Ciura
Real estate and dividend stocks are two of the most popular tools for creating passive retirement income.
The downside to owning rental property is that it doesn’t Really passive. Any landlord who has had to call a plumber or electrician in the middle of the night can confirm this.
Real Estate Investment Trusts – or REITs – are a very attractive investment vehicle for investors who want to take advantage of the returns in the real estate sector while benefiting from the hands-off approach of dividend stocks.
EPR Properties (EPR) is one of the most famous REITs. EPR recently reintroduced its monthly dividend after being on hold for over a year due to the coronavirus pandemic.
That means EPR will be added back to the list of monthly dividend stocks. We have compiled a list of 51 monthly dividend stocks, along with key financial metrics like dividend yields and payout ratios that you can view by clicking the link below:
This article analyzes EPR Properties’ investment prospects in detail.
EPR Properties is a triple net lease real estate investment trust focused on entertainment, recreational and educational properties.
Triple Net Lease means that the tenant is responsible for paying the three main costs associated with real estate: taxes, insurance and maintenance. Operation as a triple net lease REIT reduces the operating costs of EPR Properties.
EPR has identified entertainment, leisure, and education as each its three big buckets in which to invest. Attractive sub-segments of these larger segments were then identified, including cinemas, ski resorts and charter schools as examples.
The portfolio includes more than $5.9 Billions in investments over 300+Locations in 44th States including over 250 tenants.
Source: Investor Presentation
EPR focuses on a large number of different metropolitan areas in the USA and parts of Canada and is therefore not only highly diversified with its tenants, but also geographically.
2020 was a difficult year for REITs as the coronavirus pandemic resulted in prolonged closings throughout the year. As a result, EPR’s portfolio metrics deteriorated. Fortunately, the company made a notable comeback in 2021 as the properties reopen.
As of June 30, approximately 99% of theater locations and 98% of non-theater locations were open, with certain facilities in Canada remaining closed. This should drive a recovery in EPR in the future.
Prior to 2020, EPR had a track record of steady growth. Of 2010 to 2019, EPR increased its adjusted FFO-per-share by almost 8% per year. The coronavirus pandemic has turned virtually all REITs on their heads, causing EPR’s FFO per share to decline from $ 5.44 in 2019 to $ 1.43 in 2020.
EPR is still grappling with the impact of the pandemic on its financial results, which became apparent in the last quarter. EPR announced its first quarter results on May 5ththe, 2021, and the results weree still pretty ugly. Total sales decreased by 26% compared to the previous year. Cash collections were still only 72% of contractual cash receipts prior to COVID-19. Adjusted funds-from-operation (FFO) was $ 0.52 per share, down from $ 1.14 for the year-ago quarter.
Still, EPR’s results exceeded expectations for revenue and FFO, and the results were a notable improvement quarter on quarter.
Although the past year has been extremely challenging for EPR, there are still many opportunities to drive its growth. The company’s focus on experiential traits gives it a competitive advantage by protecting it from ecommerce threats. EPR believes its properties will continue to generate heavy traffic as consumers will continue to want these experiences.
Overall, we expect annual FFO growth per share of 5% over the next five years. EPR’s growth is driven by its competitive advantages. The competitive advantage of EPR is its portfolio of specialized properties. EPR has methodically identified the most profitable Real estate through years of experience and focuses its investments on these areas.
It is certainly not immune to recessionS., but whyI see EPR as one of the better–For these reasons, REITs operate in our coverage universe. A return to growth should allow the company to slowly increase the dividend over time.
EPR’s dividend history was impressive through 2020. The company had increased its annual dividend per share by around 6% per year from 2010 to 2019. Of course, the pandemic forced the company to suspend its dividend for most of 2020.
Fortunately, EPR management expects the recent recovery to continue. That expectation gave management confidence in reintroducing the $ 0.25 per share monthly dividend.
On an annual basis, the dividend of $ 3 per share is still below the pre-COVID payout of $ 4.59 per share. However, at a level of $ 3 per share, EPR stock is yielding 5.7%. As such, EPR stock remains attractive to income investors as a high dividend stock.
EPR has a reasonably leveraged capital structure that gives it considerable flexibility. It has worked to fix its post-pandemic balance sheet to further improve its dividend security and growth potential.
Source: Investor Presentation
EPR’s debt is approximately $ 3.2 billion, with a weighted average debt maturity of 5 years and a weighted average interest rate of 4.7%. It has a $ 1 billion revolver of credit that is now zero, which gives EPR ample liquidity.
All of this supports EPR’s growth plans and with it its ability to not just pay its dividend and hopefully increase it over time.
EPR’s dividend appears safe, and it is likely that the Trust will continue to increase it at reasonable rates over time as the FFO continues to rebound to pre-COVID levels. This makes the stock attractive to those seeking ongoing earnings and dividend growth.
EPR Properties appears to be improving from the major downturn of 2020 marked by the coronavirus pandemic.
The REIT has a dominant position in the ownership of cinemas, recreational facilities and educational properties.
These are relatively small subsegments of the real estate industry and give EPR the advantage of being “a big fish in a small pond”.
EPR Properties stock has a dividend yield of 5.6% and has resumed its monthly dividend payments. This makes it another attractive stock for income investors looking for high returns and monthly payouts.
This, of course, depends on the continued recovery in EPR’s portfolio metrics and financial results. Based on all of these factors, EPR Properties appears to be a good choice for income investors or investors looking for exposure to high yield REITs.
Thanks for reading this article. Please send feedback, corrections, or questions to [email protected]