Investors who are seeking a high yield and confident that consumers will continue spending on experiences should take a closer look at EPR Properties (EPR).
Headquartered in Kansas City, Mo., EPR is a real estate investment trust (REIT) that owns a diverse range of entertainment properties, including movie theaters, amusement parks and ski resorts. These properties are leased to tenants under long-term contracts.
↑ X NOW PLAYING How To Buy Stocks: IBD's Four Pillars Of InvestingThe Covid-19 pandemic severely impacted EPR, causing the closure of nearly all of its properties. As a result, the stock price plummeted by nearly 90%, hitting a low of 12.56. On the brink of bankruptcy, the company was forced to suspend its dividend for over a year.
However, the recovery has been impressive. Although the dividend has not yet returned to pre-pandemic levels in absolute terms, at 28.5 cents per month the stock offers an attractive annualized yield of 7.4%. This is well above the S&P 500's average yield of 1.2%.
The discretionary nature of EPR's properties have also worked in its favor, as recession fears have failed to materialize. If that trend continues, the company is certainly in a favorable position for sustained growth.
While many of EPR's properties have fully recovered to pre-pandemic levels, movie theaters remain a weak point. Theaters account for over a third of the company's revenue, with 158 locations in operation. Although the industry has shown signs of recovery, it still presents a risk.
However, as long as the theater business does not experience another collapse, EPR will continue to collect rental income from these properties.
In addition to its entertainment holdings, EPR has been diversifying its portfolio. The company has recently invested in educational properties, including 60 early-child-care centers and seven private schools. As of the third quarter, this educational segment accounted for 7% of total revenue.
Shares of EPR Properties this month climbed above the 50-day and 200-day moving averages. The stock is forming a flat base with a buy point of 50.26, according to MarketSurge pattern recognition.
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