It looks like EPR Properties (NYSE:EPR) is about to go ex-dividend in the next 4 days. You can purchase shares before the 30th of July in order to receive the dividend, which the company will pay on the 15th of August.
EPR Properties's upcoming dividend is US$0.38 a share, following on from the last 12 months, when the company distributed a total of US$4.50 per share to shareholders. Looking at the last 12 months of distributions, EPR Properties has a trailing yield of approximately 6.0% on its current stock price of $75.17. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether EPR Properties has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Its dividend payout ratio is 78% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth We'd be worried about the risk of a drop in earnings. While EPR Properties seems to be paying out a very high percentage of its income, REITs have different dividend payment behaviour and so, while we don't think this is great, we also don't think it is unusual. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Dividends consumed 70% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's positive to see that EPR Properties's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at EPR Properties, with earnings per share up 3.4% on average over the last five years. A payout ratio of 78% looks like a tacit signal from management that reinvestment opportunities in the business are low. In line with limited earnings growth in recent years, this is not the most appealing combination.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, EPR Properties has increased its dividend at approximately 3.0% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Should investors buy EPR Properties for the upcoming dividend? Earnings per share growth has been unremarkable, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear excessive. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of EPR Properties's dividend merits.
Ever wonder what the future holds for EPR Properties? See what the three analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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