3 Reasons to Buy EPR Properties Stock Like There's No Tomorrow

EPR Properties (EPR) has been a standout performer in the midstream energy sector, with a strong track record of consistent distribution growth and a compelling investment case. As of January 18, 2025, the company's stock price has risen by approximately 30% year-to-date, while also offering a very attractive distribution. Here are three reasons why investors should consider buying EPR Properties' stock at current levels.



1. Consistent Distribution Growth: EPR Properties has an unparalleled track record of consistency in the midstream energy space, having raised its distribution for 26 consecutive years. This consistency stems from the company's largely fee-based business model, which minimizes commodity or spread risk and provides a stable revenue stream. Approximately 90% of its contracts have inflation escalators, further protecting against inflation and maintaining revenue growth. EPR Properties' conservative approach to leverage, distribution coverage ratio, and growth capital expenditure (capex) spending has also contributed to its consistent distribution growth. Currently, the stock carries a forward yield of about 6.2%, with a distribution coverage ratio of 1.7. This strong financial position sets the company up to continue increasing its distribution in the future.



2. Growth Opportunities: In addition to its consistent track record, EPR Properties is set to ramp up its growth efforts after pulling back on growth projects following the pandemic. The company plans to spend $3.5 billion to $3.75 billion in growth capex in 2024 and $3.5 billion to $4 billion in 2025. A significant portion of this increased spending will be related to projects stemming from its recent acquisition of Pinon Midstream. EPR Properties has historically averaged an approximately 13% return on invested capital (ROIC) on its growth projects, which should lead to increased gross operating profit as these projects come online. The company is also well-positioned to benefit from the increasing demand for natural gas driven by the growing power needs of data centers due to artificial intelligence. This presents an attractive opportunity for EPR Properties to take advantage of the growing demand for natural gas.



3. Attractive Valuation: Despite its strong performance this year, EPR Properties' stock still trades at an attractive valuation from a historical perspective. Its enterprise-value-to-EBITDA (EV/EBITDA) multiple stands at 10.5, based on this year's analyst estimates. This suggests that the stock has room to see its multiple increase in the coming years, especially given the growth opportunities in front of it and a more pro-energy government administration set to take office. As a result, investors should consider buying EPR Properties' stock at current levels.



In conclusion, EPR Properties' consistent distribution growth, attractive valuation, and growth opportunities make it an appealing investment for income-focused investors. The company's strong track record, conservative financial management, and well-positioned assets set it up to continue increasing its distribution and generating attractive returns for investors. As such, investors should consider buying EPR Properties' stock like there's no tomorrow.