There are lots of ways to make passive income. An easy way for beginners is to invest in high-quality dividend-paying stocks.
EPR Properties (NYSE: EPR) stands out among dividend stocks as a great option for those desiring passive income. The real estate investment trust (REIT) pays a monthly dividend, as opposed to the standard quarterly payout, and offers a very attractive dividend yield of more than 7%. For comparison, the S&P 500 yields less than 1.5%. Here’s a closer look at some other features that make it an ideal option for passive income.
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EPR Properties is a unique REIT. It focuses on owning experiential properties, such as movie theaters, attractions, and experiential lodging properties. It leases these properties to tenants that operate those experiences. Those leases supply the REIT with relatively stable rental income that it uses to pay dividends.
The REIT currently yields more than 7%. At that rate, it could turn a $1,000 investment into more than $70 of annual dividend income, or nearly $6 each month. The more you invest, the more dividend income you stand to collect each month.
That high-yielding dividend is on a very sustainable foundation. EPR Properties expects to produce between $4.80 and $4.92 per share of funds from operations (FFO) as adjusted this year. That’s about 3.2% higher than last year at the midpoint. With its current annual dividend rate at $3.42 per share, the REIT has a comfortable dividend payout ratio of around 70%. That gives it a nice cushion while allowing it to retain a decent amount of cash to fund new income-generating investments.
EPR Properties also has a solid financial position. It has investment-grade credit, backed by a low leverage ratio and primarily long-term, fixed-rate debt. It ended the third quarter with $35.3 million of cash on its balance sheet and only $169 million outstanding on its $1 billion credit facility after recently repaying a $136.6 million debt maturity.
EPR Properties is steadily enhancing and expanding its income-producing experiential real estate portfolio. The REIT invested $82 million during the third quarter, including spending $52 million to buy a fitness and wellness property in Colorado. That brought its year-to-date total to $214.6 million, which also included spending on experiential build-to-suit development and redevelopment projects. The company expects its investment spending for the year to range between $225 million and $275 million.
