HHigh dividends can be important, but any experienced income investor knows that a dividend is as important as the company paying it. And while dividend income is nice, when you combine it with stability and the potential for long-term growth, a stock can yield life-changing wealth over time.
This is exactly why investors should take a closer look REP properties (NYSE: EPR), a real estate investment trust specializing in experiential properties. EPR has a dividend yield of 6.3% which is well covered by company earnings and makes monthly dividend payments. The company also has a massive growth opportunity that could create tons of value for investors for years to come.
EPR Properties in brief
EPR Properties is a real estate investment trust (REIT) focused on experiential real estate. Theaters, water parks, ski resorts and golf attractions are some of the properties that EPR owns and leases to its operators.
At the end of 2021, EPR had a total of 353 properties, 279 of which were experiential. The rest are educational properties (primarily early childhood centers), which the company aims to sell over time. 96% of the portfolio is occupied and the average lease term is 14 years with integrated annual rent increases.
Movie theaters are the largest property type in the portfolio (for now), with AMC Entertainment (NYSE: AMC) First tenant of EPR. Other major tenants include Topgolf, Vail Resorts (NYSE:MTN), six flags (NYSE: SIX)and Margueriteville.
Unsurprisingly, EPR tenants fell on hard times during the closures of the onset of the COVID-19 pandemic. The company’s rent collection had dropped to just 15% of contract rent at one point, and there were serious questions about the viability of some of its tenants, particularly theater operators. However, the resilience of EPR’s business shows just how much demand for experiments exists in the United States. By the fourth quarter of 2021, rent collection had risen to 97%, and EPR was so confident in its future cash flow that it gave shareholders a 10% dividend increase just months after monthly payments were restored.
We could see rapid growth for years
A few years ago, EPR held back growth in response to the pandemic, but management recently said it plans to step on the accelerator again. The company wants to diversify outside of cinemas, which account for 45% of the company’s contractual rent.
EPR management has given a list of target property types, several of which are currently in the portfolio, as well as others it aims to gain exposure to, such as cultural attractions, music venues and entertainment properties. games. In total, EPR sees an addressable market of $100 billion of properties it could target.
EPR certainly has the financial flexibility to pursue exciting opportunities as they arise. The company has nearly $290 million in cash as well as an intact $1 billion line of credit — a ton of cash for a REIT with a total market capitalization of less than $4 billion.
Dividends and growth are a winning combination for long-term investors
EPR has an excellent track record of delivering exceptional total returns to investors. Since its IPO in 1997, EPR has generated a total return of 1,400% for investors, more than double that of the S&P 500. With a well-covered dividend expected to grow in coming years and plenty of opportunities to create value through portfolio growth, EPR could be a high-yield winner for patient long-term investors.
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Matthew Frankel, CFP® owns EPR Properties. The Motley Fool owns and recommends Six Flags. The Motley Fool recommends EPR Properties and Vail Resorts. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.