Real estate and dividend stocks are two of the most-cited strategies for creating passive retirement income. The downside to owning rental properties is that it is not really passive. Any landlord who has had to call a plumber or an electrician during the middle of the night can attest to this. For investors looking to capture the returns of the real estate sector while benefiting from the hands-off approach of dividend stocks, real estate investment trusts – or REITs, for short – are a very attractive investment vehicle.
EPR Properties (EPR) is one of the most well-known REITs thanks to its strong total return history and large size relative to other REITs. EPR also has an outsized dividend yield. EPR currently has a dividend yield of 5.9%, giving it a place among the select group of stocks with 5%+ dividend yields.
You can see the comprehensive list of all 295 stocks with 5%+ dividend yields here.
Better yet, EPR Properties pays monthly dividends. This can help retirees and other income investors to budget over small time periods, and also creates a more reliable income stream. You can see the list of all monthly dividend stocks here. This article will analyze the investment prospects of EPR Properties in detail.
Business Overview
EPR Properties is a triple net lease real estate investment trust that focuses on entertainment, recreation, and education properties. Triple net lease means that the tenant is responsible for paying the three main costs associated with real estate: taxes, insurance, and maintenance. Operating as a triple net lease REIT reduces the operating expenses of EPR Properties. EPR Properties is well known for its total return history. EPR’s publicly-traded common stock has outperformed all other meaningful competitors over the past decade (which includes the financial crisis of 2007-2009).
Source: EPR Properties Investor Presentation, slide 4
Looking back further than just the past decade, EPR’s total returns have been very impressive. Since the REIT became a publicly-traded entity in 1997, EPR Properties has delivered total returns of more than 1,000% to its shareholders – more than three times the total returns of its competitors, as measured by the MSCI U.S. REIT Index.
Source: EPR Properties Investor Presentation, slide 5
EPR Properties has driven these total returns by focusing on the ‘white space’ between diversification and specialization. Most REITs are either highly diversified or highly specialized (for example, STAG Industrial (STAG) focuses solely on single-tenant industrial properties). Remarkably, EPR Properties is both. The company is highly specialized in each of the Entertainment, Recreation, and Education sectors, while having a healthy degree of diversification among them.
Source: EPR Properties Investor Presentation, slide 6
