Is EPR Properties the Smartest Investment You Can Make Today?

Key Points

• EPR Properties expects to deliver solid growth this year.

• The REIT offers a high-yielding dividend and trades at a low valuation.

• It has lots of growth potential over the longer term.

• 10 stocks we like better than EPR Properties ›

EPR Properties (NYSE: EPR) has quietly been a very winning investment. The real estate investment trust (REIT) has delivered a total return of roughly 1,800% since it went public in 1997. Its strong returns have continued over the past year, with its stock rallying about 35%.

The REIT has certainly been a smart investment over the years. Here are some reasons why it remains a wise stock to buy today.

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Solid growth in 2025

EPR Properties is having a solid year. The experiential property REIT grew its funds from operations (FFO), as adjusted, by 5.3% during the first quarter. It benefited from contractual rent increases on long-term net leases, as well as a strong box office, which boosted the income of its theater properties. The company also invested in growing its experiential real estate portfolio.

The REIT invested $263.9 million into new properties last year and another $37.7 million in the first quarter. It acquired properties in sale-leaseback transactions, which included an attraction property for $14.3 million in the first quarter.

It has also been investing in experiential development and redevelopment projects. The REIT has lined up another $148 million of projects it expects to fund over the next two years. These include its first traditional golf property and several eat-and-play venues. These investments have it on track to grow its FFO as adjusted by 4.3% per share this year at the midpoint of its guidance range.

EPR Properties' growing rental income has enabled it to steadily increase its monthly dividend. The REIT provided investors with a 3.5% dividend increase earlier this year.

Solid value proposition

EPR Properties' strong first-quarter results and positive outlook led it to boost its 2025 guidance. It now expects its FFO as adjusted to come in between $5.00 and $5.16 per share. This is up from its prior range of $4.94 to $5.14 per share. With its stock price recently below $60 a share, the REIT trades at less than 12 times its FFO. That's cheap for a net lease REIT. These REITs typically trade at around 15 times their FFO.

The experiential property owner's low valuation is why it still offers such a high dividend yield even after its rally over the past year. At around 6%, the REIT's dividend yield is several times higher than the S&P 500's (around 1.2%).

That high-yielding monthly dividend sits on a rock-solid foundation. At its current payment ($0.295 per share each month, or $3.54 annually), the REIT has a conservative payout ratio -- around 70% of its FFO as adjusted. This gives it a cushion and lets it retain cash to fund new investments. EPR also has a solid investment-grade balance sheet, which provides it with additional financial flexibility.

More growth potential

EPR Properties is currently limiting its annual investment volume to $200 million to $300 million. That's the level it can internally fund. It uses post-dividend free cash flow, asset sales, and balance sheet capacity within its current leverage level. At that investment rate, it can grow its FFO as adjusted by 3% to 4% per share each year.

The REIT is currently holding back its investment volume due to a high cost of capital, caused by higher interest rates and a lower stock price. However, interest rates are now falling, and its stock price is rising. As a result, its cost of capital has started to improve. EPR Properties could now ramp up its investment volume if it finds additional accretive opportunities. This would enable it to grow its FFO per share faster.

It should have plenty of future investment opportunities. EPR Properties estimates that the total addressable market for experiential real estate is over $100 billion. Its current portfolio is valued at around $7 billion, leaving it with considerable room to grow.

A smart option if you want income with upside potential

EPR Properties offers reliable income, solid growth potential, and trades at an attractive value, all underpinned by its unique focus on experiential real estate. Meanwhile, it has the potential to accelerate its growth rate as interest rates fall. These factors all point to EPR Properties being a very smart investment opportunity, particularly for investors seeking passive income and the potential to earn above-average total returns.

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Matt DiLallo has positions in EPR Properties. The Motley Fool has positions in and recommends EPR Properties. The Motley Fool has a disclosure policy.