Better Monthly Dividend Stock: EPR Properties vs. STAG Industrial

 POINT

• EPR Properties: Entertainment-focused REIT with a 7.1% dividend yield
• STAG Industrial: Industrial property REIT with a 4.3% dividend yield
• EPR is in the recovery phase post-COVID-19, with the cinema sector being a major risk factor.
• For stable dividends, consider STAG; for higher dividends with acceptable risks, consider EPR.

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Details

Image source: Erp Properties

📌 EPR Properties: High Dividend but with Risks EPR Properties owns entertainment-focused real estate such as theme parks, cinemas, and ski resorts. This model differentiates it from traditional commercial real estate investment trusts (REITs) by focusing on businesses that bring people together physically.

However, this business model suffered significantly during the COVID-19 pandemic. EPR temporarily suspended its dividend and, although payments have resumed, the company is still in the recovery phase.

✅ Key Risks:

• Approximately one-third of rental income comes from cinemas, a sector still weaker than pre-pandemic levels.
• The rent coverage ratio for cinemas has decreased to 1.5x, down from 1.7x in 2019.
• Other entertainment sectors (e.g., ski resorts, theme parks) have seen an increase to 2.6x.

📉 Recent Performance:

• As of Q3 2024, Adjusted Funds From Operations (FFO) have decreased year-over-year.
• The payout ratio stands at a stable 66%, but business recovery remains sluggish.

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Image source: stag industrial

📌 STAG Industrial: Stable Dividends with Steady Growth STAG Industrial focuses on industrial warehouses and manufacturing facilities, offering more stability compared to commercial real estate. Notably, STAG employs a Net Lease model, where tenants are responsible for most property-related expenses such as taxes, insurance, and maintenance.

✅ Key Strengths:

• Stable dividends with 10 consecutive years of increases, though the annual growth rate is modest at around 2%.
• A focus on logistics and manufacturing facilities, making it resilient to economic fluctuations.
• Concentration on secondary markets (smaller cities), leading to less competition and stable rental income.

📈 Recent Performance:

• Dividend yield of 4.3%, modest but with consistent growth.
• 52-week stock price range: $32.27 - $41.63, indicating low recent volatility.
• Lower operational cost burden and high tenant reliability.

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Future Outlook

📍 STAG Industrial Outlook

• With a solid base in logistics and manufacturing, STAG is resilient even during economic downturns.
• While dividend growth is modest, there is a high potential for steady growth.
• The growth of e-commerce in the U.S. may increase demand for warehouses.

📍 EPR Properties Outlook

• EPR is undergoing restructuring to reduce reliance on the cinema sector; success could lead to long-term positives.
• A decline in interest rates could enhance the attractiveness of REIT investments, potentially boosting high-dividend stocks.
• However, the volatility of an entertainment-focused portfolio remains a risk.

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Conclusion

✅ Seeking stability? → STAG Industrial

• Offers consistent dividend growth with a stable business model.
• Exhibits low volatility and resilience against economic downturns.

✅ Willing to accept higher risk for higher dividends? → EPR Properties

• Provides a high 7.1% dividend yield.
• Despite uncertainties in the cinema sector, restructuring efforts are underway.

✅ Portfolio Diversification Strategy

• Holding both REITs can balance high dividends (EPR) with stability (STAG).

📌 "STAG offers slow but steady growth, while EPR provides high dividends during its recovery phase." 🚀

Source : https://www.fool.com/investing/2025/02/15/better-monthly-dividend-stock-epr-properties-vs-st/

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Note: The above images are sourced from the official websites of EPR Properties and STAG Industrial, respectively.