Shares of EPR Properties (EPR) have experienced a positive start to 2025, with an increase of approximately 10% year to date, trading near a 52-week high. The market is responding favorably to the real estate investment trust’s (REIT) initiative to diversify beyond its traditional emphasis on movie theater properties towards higher-growth assets.
EPR Properties distinguishes itself with a 7.1% dividend yield and a monthly payment schedule, presenting an appealing income opportunity. However, such a high yield can occasionally indicate a corresponding level of risk that investors must consider.
The question remains whether the rally for EPR Properties will continue, or if now is the appropriate time to sell the stock. Here is some key information.
### Reasons to Consider Buying or Holding EPR Properties Stock
EPR Properties is a prominent specialty REIT that invests in experience-driven venues, such as theaters, amusement parks, eat-and-play centers, and ski resorts. The company owns 352 properties across the United States and Canada, providing investors with exposure to unique consumer spending trends.
Although the leisure and entertainment sectors faced significant challenges during the COVID-19 pandemic, recent trends indicate a robust recovery. Fortunately for EPR Properties, some of its key performance indicators now surpass pre-pandemic levels. For the 12 months ending September 30, the company reported a total portfolio rent coverage multiple of 2.1, higher than the 1.9 multiple recorded in 2019. This measure is important as it reflects EPR customers’ underlying earnings relative to their rental obligations, with a higher number indicating a greater capacity to meet rent payments.
The improvement for EPR has been driven by the non-theater segment of its portfolio, which includes high-profile commercial tenants like Six Flags Entertainment, Vail Resorts, and Top Golf Callaway Brands. This has balanced the weaker trends in movie theaters, impacted by sluggish box-office ticket sales amid industry changes.
EPR has been gradually reducing its reliance on theaters by selling underperforming locations while investing more selectively in other categories, aiming to establish a solid foundation for sustainable growth to enhance shareholder value.
Encouragingly, this strategy appears to be effective. EPR previously provided guidance for full-year adjusted funds from operations (AFFO) per share between $4.80 and $4.92, representing a 3.2% increase compared to 2023. This cash flow metric more than covers the current annualized dividend of $3.42. There is anticipation that EPR could announce a new increase in its monthly dividend rate when it releases its fourth-quarter earnings on February 27.
Investors confident in EPR Properties’ growth strategy have numerous reasons to consider buying and holding the stock for the long term.
### Reasons to Consider Selling EPR Properties Stock
While the appeal of a 7% yield and a rising share price is strong, potential risks must also be considered.
EPR Properties benefits from a stable economic environment, but adverse conditions, such as reduced consumer spending or increased unemployment, could impact its tenants’ financial health and exert pressure on the stock. Additionally, EPR’s balance sheet shows approximately $2.9 billion in total debt. Despite having sufficient liquidity for its short-term obligations, uncertainties regarding interest rates and the ability to secure new low-cost financing might introduce volatility.
Investors concerned about EPR Properties’ growth potential and debt management challenges might consider selling or avoiding the stock for now.
### Conclusion: A Positive Outlook
The year 2025 is critical for EPR Properties to demonstrate its market potential. There is optimism that the company can continue delivering positive shareholder returns, with dividends supported by strengthening fundamentals. For investors with a long-term perspective, acquiring shares of EPR Properties can provide an attractive income element to a diversified portfolio.
