Can You Trust EPR Properties’ 7.3% Dividend Yield?

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It’s been four years since Safety Net looked at EPR Properties (NYSE: EPR), which describes itself as “the leading experiential real estate investment trust (REIT), specializing in select enduring experiential properties in the real estate industry.”

I sure hope the consultant who came up with that wasn’t getting paid by the word. Basically, EPR is saying it is the leading company that owns properties where people do stuff and it specializes in long-term properties where people do stuff related to real estate.

EPR owns 359 properties and rents them out to more than 200 tenants – companies that run theaters, ski resorts, amusement parks and more. It also has a small portfolio of private schools and preschools.

Four years ago, we gave EPR a “C” for dividend safety, which meant there was a moderate risk of a cut.

That was just weeks before COVID-19 hit, and the company promptly eliminated its monthly dividend in May of that year.

When EPR brought the dividend back in July 2021, it was lower than the $0.3825 per share it had been paying prior to the pandemic, and the dividend remains below that level today.

Barring another global pandemic, is EPR’s dividend safe?

Not surprisingly, EPR’s funds from operations (FFO) were higher in 2022 than in 2021, when the company’s performance was still stunted by COVID-19. FFO is the measure of cash flow that we use to analyze REITs’ dividend safety.

Full-year results for 2023 have not yet been released, but FFO likely climbed substantially. This year, however, cash flow is projected to dip, which is a red flag for Safety Net.

Chart: Will EPR's FFO Be a Roller-Coaster Ride?

EPR is projected to have paid out $248 million in dividends in 2023, which equals 64% of its FFO. This year, the total amount paid in dividends is expected to increase slightly to $250 million, which, combined with falling FFO, will result in a payout ratio of 68%.

Both of those payout ratio figures are good. As long as a REIT’s total dividend payout is less than 100% of its FFO, I’m happy.

EPR has paid shareholders $0.275 per share nearly every month since March 2022. At the stock’s current price, that comes out to an attractive 7.3% yield.

The company can easily afford that dividend. However, management has shown it will take action to slash the payout if necessary. Considering the expected decline in cash flow this year, that willingness to quickly pull the plug on the dividend means there is still a moderate risk of the dividend being cut.

While much has changed in the world since we last looked at EPR in February 2020, the stock’s dividend safety rating remains the same.

Dividend Safety Rating: C

Dividend Grade Guide

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