EPR Properties (EPR) is an irresistible gem for your portfolio; the REIT is overlooked by many for not being flashy, but it offers reliable, steady, and recurring income — just what retirees need, suggests Rida Morwa, editor of High Dividend Opportunities.
The weather is heating up, and people who curtailed their entertainment for the past couple of years due to COVID are eager to get back to enjoying the pleasures of life. EPR Properties is a REIT focused on owning experience-based properties.
It operates the types of places you go to do things — a romantic trip to The Springs Resort in Pagosa, Colorado; a visit to Jellystone Park in Warren, Wisconsin or the Titanic Museum in Branson, Missouri; or go to its movie theaters or play at a Top Golf facility. There is a lot of fun to be had at EPR's properties.
Since the theme of EPR's investments is properties where people "go out," EPR was hit especially hard by the Covid pandemic as everything was shut down, and these types of properties were among the last to open. EPR's management did the right thing, maintaining the balance sheet and weathering the storm.
The REIT spent much of the pandemic ensuring that it improved its balance sheet. EPR reduced interest expense by issuing bonds at 3.6% to pay off the debt that was at 5.25%, resulting in immediate interest savings.
Even though at one point 60% of EPR's tenants stopped paying rent, EPR made it through the crisis without taking on new debt and slightly reduced its share count by buying back shares at rock-bottom prices in March/April 2020. EPR exited the pandemic as a stronger company.
Now the focus is on growth. EPR has the capital on hand to deploy $1-$1.5 billion in new acquisitions. EPR recently announced the acquisition of two properties in Canada, Village Vacances Valcartier resort and hotel in Quebec City, Quebec, and the Calypso Waterpark in Ottawa, Ontario.
EPR is back to growing, and that growth will be done with cash on hand, meaning that shareholders will see the benefits of that growth on the bottom line without dilution. While we wait for that growth, EPR is paying a $0.275/month dividend — yielding 7.5% — which we expect will be raised as EPR buys more properties.
