Shares of EPR Properties (NYSE: EPR) are off to a robust begin in 2025, up about 10% yr up to now and at the moment buying and selling close to a 52-week excessive. The market seems to be cheering an effort from the true property funding belief (REIT) to diversify past its conventional deal with movie show properties towards extra high-growth belongings.
EPR Properties stands out by way of its 7.1% dividend yield and month-to-month fee schedule providing a compelling revenue alternative. Then again, that ultra-high yield can typically sign a corresponding degree of threat that traders have to steadiness.
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Can the rally in EPR Properties preserve going, or is now the time to promote the inventory? Here is what you should know.
The case to purchase or maintain EPR Properties inventory
EPR Properties is a number one specialty REIT centered on investing in experience-driven venues comparable to theaters, amusement parks, eat and play facilities, and ski resorts. The corporate’s portfolio of 352 properties throughout the U.S. and Canada affords traders publicity to a singular aspect of client spending themes.
Whereas the leisure and leisure industries had been considerably impacted throughout the COVID-19 pandemic, the most recent tendencies present a stable restoration. The excellent news for EPR Properties is that a few of its key efficiency indicators now exceed pre-pandemic benchmarks. Its final reported whole portfolio lease protection a number of, for the trailing 12 months ended Sept. 30, was 2.1 — greater than the 1.9 a number of in 2019. This metric is necessary because it describes EPR prospects’ underlying earnings relative to their base rental obligations, with the upper quantity reflecting a higher capacity to comfortably cowl their rents.
The advance for EPR has been pushed by the non-theater section of its portfolio, which serves high-profile business tenants like Six Flags Leisure, Vail Resorts, and High Golf Callaway Manufacturers. This dynamic has balanced the weaker tendencies in film theaters from names like AMC Leisure, which have been marred by sluggish box-office ticket gross sales amid an trade shakeup.
Picture supply: Getty Photographs.
EPR has moved to steadily cut back its reliance on theaters by promoting off underperforming places whereas investing extra selectively in different classes. The plan is to construct a stronger basis for sustainable progress to reinforce shareholder worth.
Favorably, it seems the technique is already paying off. EPR beforehand guided for full-year adjusted funds from operations (AFFO) per share between $4.80 and $4.92, which on the midpoint represents a 3.2% enhance in comparison with 2023. This money circulate indicator greater than covers the present annualized dividend of $3.42. There’s some anticipation for EPR to announce a brand new enhance to its month-to-month dividend fee when it releases its fourth-quarter earnings (for the interval ended Dec. 31) on Feb. 27.
Buyers assured that EPR Properties can efficiently execute its progress technique have loads of causes to purchase and maintain the inventory for the long term.
Knowledge by YCharts.
The case to promote EPR Properties inventory
It is powerful to beat the attract of an funding yielding 7% alongside a climbing share worth. That mentioned, the opposite aspect of the equation is the danger, with a consideration for what might go flawed.
EPR Properties advantages from a resilient financial backdrop, however a state of affairs during which circumstances deteriorate by way of a slowdown in client spending or a spike in unemployment would seemingly have an effect on the monetary well being of its tenants and stress the inventory. All that is in opposition to a broader concern relating to EPR’s steadiness sheet debt place of roughly $2.9 billion in whole debt. Regardless of ample liquidity to fund near-term obligations, some uncertainty relating to rates of interest and the power of the corporate to safe new low-cost financing might introduce volatility.
Buyers who see EPR Properties struggling to develop whereas having difficulties managing its debt can think about promoting the inventory or at the very least avoiding it for now.
Resolution time: A bullish outlook
2025 can be a pivotal yr for EPR Properties to reaffirm its market potential. I am optimistic that the corporate can proceed delivering constructive shareholder returns, with the dividend supported by firming fundamentals. For traders with a long-term time horizon, shopping for shares of EPR Properties can add a gorgeous revenue part to a diversified portfolio.
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Dan Victor has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Six Flags Leisure and Vail Resorts. The Motley Idiot recommends EPR Properties and Topgolf Callaway Manufacturers. The Motley Idiot has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the writer and don’t essentially mirror these of Nasdaq, Inc.
