Is EPR Properties a Compelling Turnaround Play Despite the 20% Drop?

EPR Properties (NYSE:EPR) has faced significant headwinds since the pandemic, with its stock price plummeting over 50% from its 2019 peak. While the shares have rallied recently, a 20% drop from their March highs has sparked investor skepticism. Yet beneath the volatility, EPR's fundamentals are quietly rebuilding. A closer look at its dividend sustainability, portfolio diversification progress, and valuation relative to pre-pandemic metrics reveals a compelling turnaround story—one that positions EPR as a high-conviction dividend recovery bet.

Dividend Sustainability: A Healthier Payout Ratio and Rising Yields

EPR's dividend has long been its crown jewel, but the pandemic tested its resilience. In 2019, the dividend payout ratio hit 83% of FFO, stretching its financial flexibility. Today, the metrics are far stronger. First-quarter 2025 Funds From Operations (FFO) rose 5.3% to $1.19 per share, while the payout ratio dropped to 72.2% after a 3.5% dividend hike to $0.295 per month. This leaves ample room for future increases. With an annualized dividend of $3.54, the current yield sits at 7.8%, among the highest in the REIT sector. This compares favorably to its pre-pandemic yield of ~8%, suggesting it can grow further as FFO stabilizes.

Portfolio Diversification: Beyond Theaters, Toward Resilient Experiences

EPR's pivot away from overexposure to movie theaters—a sector gutted by pandemic closures—is central to its turnaround. In 2020, theaters represented 60% of its portfolio; today, they account for just 16% of its $6.4 billion experiential portfolio. The shift has focused on higher-growth, less cyclical segments like fitness centers (22 properties), attractions (25), and experiential lodging (11). Education assets, now 6% of the portfolio, are fully leased, offering steady cash flow. Crucially, the portfolio's weighted-average lease term has lengthened, reducing tenant turnover risk.

Tenant health is improving too. Experiential properties are 99% leased, excluding assets slated for sale, while education remains fully occupied. This stability contrasts sharply with the 2020 crisis, when theater occupancy dipped to 60% and forced $85 million in impairments. Capital recycling—selling non-core assets like underperforming theaters—has generated $78.9 million in 2025 alone, with plans to sell up to $120 million more this year. This liquidity fuels new projects, such as a $148 million pipeline of experiential developments.

Valuation: A Discounted Dividend Machine

EPR's stock price has lagged its FFO recovery, creating a valuation opportunity. Pre-pandemic, shares traded at a P/FFO of ~10.8x (based on 2019 FFO of $5.44 and a $59.44 peak price). Today, with 2025 FFO guidance of $5.00–5.16, the stock's current price (~$32.50) implies a P/FFO of ~6.3x–6.5x. This discounts not only EPR's 7.8% yield but also its strategic realignment. Compared to peers like AMC (which still relies heavily on theaters), EPR's diversified model offers superior resilience.

Risks: Cyclicality and Competition

No turnaround is without risks. Experiential sectors remain cyclical; a recession or prolonged consumer caution could strain tenants like fitness centers or theme parks. Competition for high-quality experiential properties may also pressure rental growth. Additionally, EPR's debt-to-EBITDA ratio, while manageable at 4.7x, leaves little margin for error if occupancy drops. Investors must weigh these risks against EPR's progress in diversifying and deleveraging.

Conclusion: A High-Conviction Dividend Play

EPR Properties is no longer the theater-heavy REIT of 2019. Its disciplined pivot to resilient experiential assets, combined with a sustainable dividend and a discounted valuation, makes it a standout recovery story. While risks linger, the 7.8% yield, improving FFO trajectory, and capital-light strategy create a compelling risk-reward profile. For income-focused investors willing to endure near-term volatility, EPR's turnaround momentum justifies a buy rating at current levels.