A Deep Dive Into: $EPR EPR Properties

EPR Properties announced this week that it would resume its monthly dividend of $0.25 per share. Before the pandemic, this was one of my largest holdings and accounted for the majority of my dividend income but after the pandemic is it still worth buying?

Who are they and what do they do?

EPR properties operates as a real estate investment trust. The firm engages in the development, finance and leasing of theatres, entertainment retail and family entertainment centers. It operates through the following segments: Entertainment and Education.

The entertainment segment includes investments in megaplex theatres, entertainment retail centers, family entertainment centers and other retail parcels.

The education segment comprises of investments in public charter schools.

The company was founded by Peter C. Brown on August 22, 1997 and it headquartered in Kansas City, MO.

Lets see those properties

EPR properties has a total of 354 properties in their portfolio across multiple market segments including 177 theatres, 55 eat and play attractions, 13 ski resorts, 18 attractions, 6 experimental lodging resorts, 1 casino, 3 cultural attractions, and 7 fitness and wellness locations.

EPR properties biggest customer in the theatre space is AMC, but also has other theatres in its portfolio such as Cinemark and Regal Cinemas.

The Eat & Play attractions include Top Golf, Pinestripe Bowling, and Andretti Indoor Carting, among others.

In the attractions category we have not 1 but 2 six Flags locations and Premier Parks located in Pacific Park, CA.

Experimental Lodging includes The Spring Resort and Spa in Colorado, along with Camelback resort in PA and Margaritaville Hotel in Nashville, TN.

Cultural locations include City Museum in St. Louis and the Titanic Museum in Pigeon Forge, TN; along with other zoos and aquariums.

They have a lot to show, but money talks

EPR’s revenue is largely tied to the success of theatres, with it accounting for 47% of its revenue. Therefore, this company’s financial success heavily relies on peoples ability to go out and have some fun. The pandemic proved this with the company’s revenue coming in at 414 Million for the year, down from 651 Million in 2019, a 57% drop. However, before this the company was consistently growing revenues year over year with 514 million in 2017, 563 million in 2018, and 649 million in 2019 being an average growth rate of 12.3% per year.

The dividend

EPR Properties has been paying dividends since 2011, with 2020 being the first interruption. That’s 9 consecutive years of paying a dividend, and each year the dividend was raised. Between 2019, and 2020 the dividend grew at 1.8% before ultimately being suspended. The dividend has been reinstated as of July 2021, however at a much lower yield of 4.6%.

Long term the dividend hasn’t effected growth as EPR price per share had been growing steadily until 2020.

Lets talk sustainability

EPR is classified as a REIT and therefore it must comply with the 90% rule. That is they must pay out 90% of their revenue to shareholders in the form of dividends. As of now the payout ratio is 80% as they ease there way back into paying a dividend.

Assuming that the COVID-19 pandemic continues to improve across the US and streaming doesn’t continue to take a chunk of out of theatre revenue then EPR could continue to pay a dividend for years to come.

However, at the time of writing this the US is seeing a surge in delta variant COVID cases and there is a new streaming service every other day with Disney+, Discovery+, and a slew of others moving their content to their services.

EPR Properties has revenue coming from other attractions as stated before but it accounts for a minimal percentage of their revenue.

On top of this EPR currently has a total debt load of 3.8 billion, and only around 500 million in cash on hand. Debt can be expected in real estate, but 3.8 billion is a big number.

For now, I’m holding off on re-entering this company until the company can prove it can continue to grow revenues and become less reliant on theatres.

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