EPR Properties: 5.9% Yield, Monthly Dividend Income

More specifically, the $5.5 billion+ portfolio of EPR Properties is broken down as follows:

  • 49% Entertainment
  • 25% Education
  • 23% Recreation
  • 3% Other

The company’s portfolio is highly diversified within each segment, with 338 locations leased to 250+ tenants in 42 states, DC and Canada.

EPR Properties Portfolio Value

Source: EPR Properties Investor Presentation, slide 11

To get a sense of the actual operations of each segment, consider the following table (which follows the same color scheme as the above pie chart).

EPR Properties Portfolio Detail

Source: EPR Properties Investor Presentation, slide 12

EPR’s Entertainment segment owns theaters, retail centers, and family entertainment centers. The Recreation segment owns water parks, golf courses, and ski hills. Lastly, the Education segment of EPR Properties is in the business of owning public charter schools, private schools, and early childhood education locations. Each of the three operating segments of EPR Properties benefits from substantial geographic diversification within the United States and Canada, shown below.

EPR Properties Property Map

Source: EPR Properties Investor Presentation, slide 13

Growth Prospects

Although an established REIT with a market capitalization of $5.2 billion, EPR Properties still has many opportunities to drive its growth. In the past, the REIT has grown by making regular property acquisitions in each of its operating segments. In recent years, the amount of new investment allocated to its two smaller segments (Education and Recreation) has increased notably. This may be a sign that EPR Properties is attempting to diversify away from its dominant Entertainment business. 

EPR Properties Focused Growth

Source: EPR Properties Investor Presentation, slide 7

The reason why the Entertainment segment is such a large component of the greater EPR Properties business is because initially, EPR Properties focused solely on this area of the real estate market. As the trust grows, it has been diversifying its real estate portfolio. The steady real estate acquisitions made by EPR Properties has translated to fundamental growth in the REIT’s underlying business. The company has grown its funds from operations (FFO), revenue, and net income at satisfactory rates over the last several years.

EPR Properties Operating Performance History

Source: EPR Properties Investor Presentation, slide 44

As a REIT, EPR Properties is required by law to pay the majority of its income to shareholders as dividend payments. Thus, the trust has limited capital to reinvest for internal growth. EPR raises capital to fund growth by issuing debt and equity securities. EPR’s growth prospects remain bright because of its leadership in the segments that it operates in. The company has a flexible balance sheet (more on that later), which means it has the capability to issue new securities to raise capital and acquire properties.

Competitive Advantage & Recession Performance

The competitive advantage of EPR Properties comes from its expertise in each of its three operating segments. It is one of the few REITs with the size and expertise to close on large real estate deals in the Entertainment, Recreation, and Education sectors. EPR also benefits from its highly decentralized management structure. Each segment of the REIT (Entertainment, Recreation, and Education) operates independently and reports to the company’s senior executive team.

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