EPR Properties Cuts Dividend Amid Pandemic Concerns

EPR Properties has resumed its dividend after a suspension due to pandemic-related challenges. While the current yield stands at 7.6%, the cut raises investor caution. The company targets reducing its dependence on traditional theaters as digital consumption rises.

Date: 07-12-2024

AI Rating: 5

The report discusses the significant impact of the coronavirus pandemic on EPR Properties, leading to a suspension of its dividend. This action could be problematic for a dividend stock, as dividends are a key attraction for income-focused investors.

When the dividend was reinstated, it was at a level lower than pre-pandemic figures. This suggests that while the company is attempting to recover, it still faces challenges in restoring investor confidence. The current yield of 7.6% may seem attractive; however, it is accompanied by renewed skepticism from Wall Street due to past actions.

The analysis highlights that prior to the pandemic, EPR Properties had a heavy focus on movie theaters, which accounted for around 45% of its business—a fact that introduced significant risk amid a shift towards online entertainment during stay-at-home orders.

In response to these challenges, EPR Properties is attempting to diversify its portfolio. Theater properties have been reduced from 45% to 36% of the business, while sectors like fitness and attractions have grown significantly. This shift demonstrates the company's efforts to minimize vulnerability to changing consumer behaviors.

Regarding the safety of the dividend, the third-quarter adjusted funds from operations (FFO) payout ratio was reported at 66%. This indicates that the dividend is currently sustainable, although the drop from previous levels might deter some investors.

Stocks: EPR