EPR Properties: Entertainment and Education

11/11/2016 9:00 am EST

Focus: REITS

Tim Plaehn

Investment Research Analyst, Investors Alley

There are now some very high-quality REITs trading at much lower prices than where they were a few months ago, explains Tim Plaehn, editor of The Dividend Hunter.

EPR Properties (EPR), a midcap REIT, has a dominant position in a smaller sector of commercial real estate; it pays an attractive yield that has been increased at an above average rate and pays monthly dividends.

In a very tough market for REITs, EPR has performed well with more growth and higher dividends to come.

EPR functions as a triple-net lease (NNN) REIT. With this model, the tenants are responsible for all of the operating costs like taxes, utilities and maintenance.

EPR's job is to collect the rent checks. Typically, NNN leases are long-term, for 10 years or more, with built-in rent escalations; the combination makes triple-net REITs one of the more stable sectors.

EPR Properties separates itself from the rest of the pack with the highly focused types of properties the company owns. The EPR assets can be divided into the three categories of Entertainment, Recreation, and Education. 

The focus specialties of the REIT are long-lived businesses with growing revenues. For example, the gross proceeds of movie theaters have grown by 4% to 5% per year on average for the last 25 years.

Currently, adding education properties is the primary growth focus. There is a growing backlog of students who want to attend a private charter school.

And in the recreation segment, EPR has partnered with industry leader, TopGolf, as the tenant and operator of the golf complexes.

The EPR growth model has done well for investors. The annual dividend rate has been growing by 6% to 8% for the last seven years.

With the recent decline in share price, the EPR yield has climbed from under 4.5% up to around 5.5%

This stock should be a core holding for the income focused investor and the current sell off in the stock should be viewed as an opportunity to buy or add shares to an existing position.

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By Tim Plaehn, editor of The Dividend Hunter

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