EPR Properties (NYSE: EPR) is a unique real estate investment trust (REIT). It owns properties in three industries – entertainment, education and recreation. The company leases properties to 158 Megaplex theaters and 11 family entertainment centers that include bowling alleys and go-kart courses. It also leases golf courses, ski areas, and public charter and private schools.
Funds from operations (FFO), a measure of cash flow used by REITs, has been steadily climbing for the past several years – although it is expected to slip in 2019. This year, EPR Properties’ FFO is forecast to come in at $436 million, while the REIT is expected to pay shareholders $336 million in dividends for a payout ratio of 77%. Payout ratio is the percentage of earnings or cash flow that a company pays in dividends.
Next year, due to lower projected FFO, the payout ratio is predicted to be 83%. For a regular corporation, the payout ratio should not slip below 75%, but REITs are different. By law, REITs must pay out 90% of their earnings in dividends in order to take advantage of certain tax benefits, so as long as a REIT’s payout ratio is below 100%, that’s okay.
The company pays a monthly dividend. In fact, EPR Properties just raised it for the ninth year in a row.
With the new increased dividend, the stock now yields 6.3%.
Sven Franssen