EPR Properties: A Growing Investment Opportunity or a Risky Bet?
Shares of EPR Properties (NYSE: EPR) have seen a robust start in 2025, climbing approximately 10% year to date and currently trading close to a 52-week high. Investors are reacting positively to the company’s strategy to diversify beyond its traditional focus on movie theater properties into more high-growth sectors.
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As the stock experiences increased momentum, is it time for investors to hold onto their shares of EPR Properties or consider selling? Let’s dive into the details.
Understanding the Case for Buying or Holding EPR Properties
EPR Properties is a prominent specialty REIT that invests in experience-focused venues like theaters, amusement parks, eat-and-play centers, and ski resorts. With a portfolio of 352 properties across the United States and Canada, EPR offers a unique investment angle aligned with consumer spending trends.
Despite the significant challenges faced by the leisure and entertainment sectors during the COVID-19 pandemic, signs of recovery are evident. Notably, some of EPR’s key performance metrics have surpassed pre-pandemic levels. For instance, the total portfolio rent coverage multiple for the 12 months ending September 30 was 2.1, up from 1.9 in 2019, indicating tenants’ financial health and their ability to meet rent obligations.
This improvement has been largely fueled by the non-theater segment, which includes high-profile tenants such as Six Flags Entertainment, Vail Resorts, and Top Golf Callaway Brands. This diversification counteracts the struggles seen in the movie theater industry, exemplified by AMC Entertainment, which has faced declining ticket sales amid significant industry changes.
Image source: Getty Images.
EPR has been strategically reducing its reliance on theaters by divesting underperforming locations and selectively investing in more promising areas. This strategy aims to establish a sustainable foundation for growth, ultimately enhancing shareholder value.
The strategy is already showing signs of success. EPR had projected full-year adjusted funds from operations (AFFO) per share between $4.80 and $4.92, which indicates a 3.2% increase compared to the previous year. This cash flow significantly exceeds the current annualized dividend of $3.42. Anticipation is building for a possible increase in the monthly dividend rate when the company announces its fourth-quarter earnings on February 27.
For investors confident in EPR Properties’ growth strategy, there are compelling reasons to buy or hold the stock for the long term.
Data by YCharts.
The Argument for Selling EPR Properties Stock
While a stock yielding 7% with rising prices is undoubtedly attractive, it is essential to weigh the associated risks.
EPR Properties benefits from a strong economic backdrop, but a decline in consumer spending or a rise in unemployment could negatively impact its tenants’ financial stability and consequently pressure the stock. Compounding this concern is EPR’s total debt position of approximately $2.9 billion. Although the company has sufficient liquidity for immediate needs, uncertainties surrounding interest rates and securing affordable financing could contribute to market volatility.
Investors anticipating challenges for EPR Properties in managing its debt and achieving growth might contemplate selling the stock or refraining from purchasing at this time.
Final Thoughts: A Positive Outlook
The year 2025 stands to be crucial for EPR Properties to solidify its market potential. A cautiously optimistic outlook suggests that the company can continue to deliver value to shareholders, as solid fundamentals support the dividend. For those with a long-term investment perspective, adding EPR Properties shares could provide an attractive income element to a well-rounded portfolio.
Should You Invest $1,000 in EPR Properties Now?
Before making any investment in EPR Properties, consider the following:
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Dan Victor has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Six Flags Entertainment and Vail Resorts. The Motley Fool recommends EPR Properties and Topgolf Callaway Brands. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
