This Monthly Payer Is Restarting Dividends And Paying A 5.5% Yield

| August 4, 2021

The 2020 economic shutdown produced wildly different results for businesses, depending on their positions in the economy. Some sectors, such as technology, sailed through the shutdown without a scratch. Other economic sectors, such as travel and tourism, took a tremendous hit.

Is now the time to shift from the 2020 winners into stocks that most stand to benefit from a reopening economy? I want to discuss one stock that illustrates the extremes of the shutdown and recovery.

EPR Properties (EPR) is a REIT that owns “experiential” and education-focused properties. This table shows the portfolio breakdown.

Before the pandemic, EPR had a 20-plus year track record of steadily growing dividend payments. However, the pandemic-triggered economic shutdown forced an almost 100% closure of the operations of EPR’s tenant companies. The company suspended its monthly dividend in May 2020.

The pandemic turned EPR from a “buy and hold forever” dividend stock to one to sell because no one could predict the company’s future. I did recommend to my subscribers to pick up some EPR preferred shares, and we made some nice gains as the preferreds recovered from a post-crash low of $16 per share all the way back to par.

On July 13, I was happy to read that EPR will resume paying common stock dividends. Here are a couple of excerpts from the press release:

  • “As of June 30, 2021, approximately 99% of the Company’s theatre and 98% of the Company’s non-theatre locations were open, excluding normal seasonal closings. Certain assets remain closed in Canada pursuant to local restrictions.”
  • “For the second quarter of 2021 the Company collected approximately 82% of contractual cash revenue. This cash collection level is in excess of the high end of the previously announced guidance for the second quarter of 75%-80% and continues the favorable trajectory of cash collections the Company is experiencing.”
  • “In addition to the collections above, collections of deferred rent and interest during the second quarter from accrual basis tenants totaled $16.3 million, bringing the total for such collections to $45.9 million for the six months ended June 30, 2021.”

Translation: EPR is now collecting more than 80% of regular rent, and payments that were missed due to the pandemic are starting to come in as well.

EPR’s initial dividend will be $0.25 per share, with the first payment on August 15. EPR pays monthly dividends, so the dividend rate gives a current yield of 5.5%.

Despite the short-term havoc from the pandemic shutdown, EPR business provides tremendous advantages. As far as I know, the company is unique for the types of properties it owns. That makes EPR a top choice to monetize properties in a market with $100 billion worth of real estate. EPR to date has invested just over $6 billion.

Lease features allow EPR to exhibit stability and revenue growth. These features include:

  • Long-term leases with a current weighted average term of 14.9 years
  • Built-in 1.5% to 2% annual rent escalators
  • Strong tenant credit with cross defaults, master leases, and corporate guarantees

As pandemic restrictions EASE, the properties owned by EPR offer drive-to locations and lower price points compared to pre-pandemic vacation or entertainment choices.

Before the pandemic shutdown, the EPR dividend was $0.38 per share. Over time, I expect the company will work the dividend back up to that level and start a new history of dividend growth.

Note: This article originally appeared at Investors Alley.

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Category: Dividend Stocks To Buy?

About the Author ()

Tim Plaehn is the lead investment research analyst for income and dividend investing at Investors Alley. He is the editor for The Dividend Hunter, an investment advisory delivering income investments with double digit growth in share price and dividend payments, and 30 Day Dividends, a specialty income service that takes advantage of opportunities for relatively fast, attractive profits around potential dividend payouts.

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