Essential Properties Realty Trust (EPRT): Is This 4.1% Yielding REIT a Buy for 2026?

Essential Properties Realty Trust (EPRT) has long been a cornerstone of the net-lease REIT sector, offering a blend of defensive characteristics and disciplined growth. As 2026 approaches, the question on investors' minds is whether this 4.1% yielder remains a compelling buy amid a sector undergoing structural shifts. Drawing from recent data and sector analysis, this article evaluates EPRT's dividend growth trajectory, valuation metrics, and competitive positioning to determine its investment appeal.

Dividend Growth: A Track Record of Stability and Incremental Progress

EPRT's dividend history from 2020 to 2025 reveals a consistent upward trajectory. For instance, the quarterly payout rose from $0.27–$0.28 in 2023 to $0.31 in December 2025, reflecting a 5.28% five-year CAGR. The 2026 dividend guidance of $0.31 per share, announced in December 2025, signals management's confidence in sustaining this momentum. This 3% increase from the prior quarter underscores EPRT's ability to balance growth with prudence, supported by a forward payout ratio of 59% and a trailing twelve-month (TTM) funds from operations (FFO) per share of $1.93.

Analysts highlight EPRT's disciplined approach to capital allocation as a key driver of dividend sustainability. The company's portfolio of 2,266 single-tenant net lease properties, with a weighted average lease term of 14.4 years, provides a stable cash flow foundation. This structural resilience is critical in a sector where tenant credit quality and lease terms often dictate long-term performance.

Valuation Metrics: Attractive but Not Overlooked

EPRT's valuation metrics position it as a moderate-value play within the net-lease REIT sector. As of September 2025, the stock traded at a price-to-FFO (P/FFO) ratio of 15.95, above the sector average of 12x but below peers like NNN REIT (11.9x). While this premium reflects investor confidence in EPRT's conservative leverage and high-quality tenant base, it also suggests the stock is not undervalued. However, the forward P/AFFO ratio of 14.5 indicates improving affordability.

The dividend yield of 4.04%–4.2% places EPRT in the middle of the net-lease REIT spectrum. While it trails peers like Realty Income (5.7%) and Rexford Industrial (4.41%), its yield remains competitive given its defensive profile. Crucially, EPRT's 8.0% weighted average cash cap rate on Q3 2025 acquisitions outperforms the sector's 6.9% average, creating a favorable investment spread. This spread-defined as the difference between acquisition yields and financing costs- has widened in 2025 due to stabilized cap rates and relatively flat interest rates, enhancing value creation potential.

Sector Dynamics: Navigating Transformation with Defensive Strengths

The net-lease REIT sector is undergoing a recalibration in 2025–2026, driven by stabilized cap rates and improved financing availability. Cap rates for STNL assets settled around 6.9% in Q2 2025, a 130-basis-point increase since late 2022 but with no sharp quarterly spikes. This stability has narrowed bid-ask spreads and restored buyer confidence, enabling REITs like EPRT to deploy capital efficiently.

EPRT's strategic positioning as a "defensive" REIT-characterized by long-term, triple-net leases with investment-grade tenants-provides a buffer against macroeconomic volatility. For example, its portfolio's 3.6x rent coverage ratio ensures tenants can withstand temporary earnings dips, a critical factor in a low-growth environment. J.P. Morgan Research projects sector-wide earnings growth of 3% in 2025 and 6% in 2026, with EPRT's conservative leverage and disciplined acquisition strategy placing it among the top performers.

Risks and Opportunities in 2026

Despite its strengths, EPRT faces headwinds. The forward payout ratio of 59% leaves room for growth but requires continued earnings expansion to justify further dividend hikes. Additionally, the sector's reliance on equity financing to fund acquisitions could dilute shareholder value if capital markets tighten. However, EPRT's $369.8 million Q3 2025 investment at an 8.0% cap rate demonstrates its ability to secure high-yield opportunities even in a competitive landscape.

A key opportunity lies in the sector's projected outperformance in 2026. With listed REITs expected to deliver lower-to-mid double-digit returns, EPRT's liquidity and balance sheet flexibility position it to capitalize on market dislocations. Its $1.2 billion in 2025 acquisitions, including $333.4 million in Q4 alone, highlights its aggressive yet measured growth strategy.

Conclusion: A Buy for Income-Oriented Investors

Essential Properties Realty Trust's combination of consistent dividend growth, defensive portfolio characteristics, and favorable investment spreads makes it a compelling buy for 2026. While its valuation premium to the sector average may limit short-term upside, its long-term fundamentals-anchored by 14.4-year lease terms and a 3.6x coverage ratio-offer resilience in uncertain markets. For income-focused investors seeking a balance of yield and stability, EPRT's 4.1% yield and disciplined management team present a compelling case.