3/8/25
Essential Properties Realty Trust (EPRT) is a real estate investment trust (REIT) that specializes in leasing properties to single-tenant businesses. The company focuses on service-oriented and experience-based tenants like restaurants, car washes, early childhood education centers, and medical offices. With a portfolio of over 1,600 properties across 48 states, EPRT has built a stable business model centered around long-term leases that generate reliable income.
For investors seeking steady dividends, EPRT is an interesting option. The stock has a solid history of dividend growth, but with a payout ratio above 100%, there are some factors worth considering. Its current yield is a bit below historical averages, and while revenue growth has been strong, rising interest rates could impact the company’s future expansion.
🔑 Key Dividend Metrics
💰 Dividend Yield: 3.65% (Forward), 3.66% (Trailing)
📈 5-Year Average Dividend Yield: 4.38%
🏦 Payout Ratio: 100.87%
📅 Most Recent Dividend: $1.18 per share (forward)
📆 Ex-Dividend Date: December 31, 2024
💵 Dividend Growth: Consistent but slowing
Dividend Overview
EPRT’s dividend yield sits at 3.65%, which is respectable but slightly below its five-year average of 4.38%. This suggests that the stock price has increased faster than its dividend payouts, which could mean investors are pricing in future growth.
One potential concern is the payout ratio, which is currently above 100%. That means the company is paying out more in dividends than it earns in net income. While REITs are required to distribute most of their taxable income as dividends, this high ratio does raise questions about how much flexibility EPRT has for future dividend increases.
The company has steadily grown its dividend since going public in 2018, which shows commitment to rewarding shareholders. However, with the payout ratio stretched, future growth may be more measured.
Dividend Growth and Safety
EPRT has been a consistent dividend grower, increasing its payout every year since its IPO. That reliability is attractive to income-focused investors.
However, dividend safety depends on cash flow, and with a payout ratio exceeding 100%, the margin for error is thin. If earnings growth slows or borrowing costs rise, the company may need to moderate dividend growth or, in a worst-case scenario, consider a cut. Right now, that’s not an immediate risk, but it’s something to monitor.
Interest rates also play a role in REIT dividend stability. With rates still elevated, borrowing to fund property acquisitions has become more expensive. This could limit EPRT’s ability to expand its portfolio, which in turn affects future earnings growth.
Chart Analysis
Price Movement and Trend
EPRT has been in a general uptrend for most of the past year, with the stock climbing from around $25 to its recent close at $32.29. The price reached a peak near $35 before pulling back and entering a consolidation phase. This sideways movement has been in play for the last few months, with multiple attempts to push higher but without significant follow-through.
The 50-day moving average (blue line) has flattened out and is interacting closely with the stock price, indicating a period of indecision. The 200-day moving average (purple line) continues to trend upward, which suggests that the long-term trend is still intact, despite recent short-term weakness.
Support and Resistance
The stock appears to have strong support around the $30 level, where buyers have stepped in multiple times. On the upside, resistance is forming around $33 to $34, where previous attempts to break higher have been met with selling pressure. Until EPRT clears this level with volume, it may continue to trade within this range.
Volume and Market Participation
Trading volume has been relatively stable, with occasional spikes, particularly during price declines. The highest volume days occurred around sharp sell-offs, which suggests some profit-taking. Recent trading activity shows lower volume, indicating a lack of strong conviction from buyers or sellers at this level.
Relative Strength Index (RSI)
The RSI indicator is hovering in the mid-range, neither overbought nor oversold. This confirms the lack of a dominant trend in the short term. If RSI moves above 70, it could indicate that the stock is overbought and due for a pullback. If it drops below 30, it would suggest oversold conditions and a possible buying opportunity.
Moving Average Interaction
The 50-day moving average recently crossed below the price, and the stock is trying to reclaim it. A sustained move above this level would be a positive sign for momentum, while rejection could lead to another retest of the lower support zone. The 200-day moving average remains intact and could act as a safety net if the price drifts lower.
Recent Candle Activity
The last five trading sessions show mixed action, with a couple of strong green candles suggesting buying interest, but also some wicks on the upside, indicating that sellers are present. The last candle closed near the high of the day, which could hint at some bullish momentum, but follow-through will be needed to confirm any meaningful breakout.
Analyst Ratings
📈 Upgrades:
Several analysts have expressed optimism about EPRT’s outlook. One notable upgrade came from an investment firm that initiated coverage with a “Buy” rating and a $30 price target, citing the company’s strong portfolio and stable lease agreements. Another firm set a higher target at $38, highlighting EPRT’s ability to secure long-term tenants in recession-resistant industries. Analysts who upgraded the stock pointed to steady revenue growth, manageable debt levels, and an attractive dividend yield as key factors supporting a positive long-term outlook.
📉 Downgrades:
On the other side, some analysts have taken a more cautious approach. One firm recently downgraded EPRT from “Buy” to “Neutral”, adjusting its price target from $33.50 to $29.50. The reason? Concerns over tenant credit risks, the aging of its property portfolio, and valuation levels that may be limiting upside potential. Another analyst noted that while the REIT has performed well, the rising cost of capital could slow future growth, making the stock less compelling compared to other opportunities in the sector.
🎯 Consensus Price Target:
The latest consensus among analysts places EPRT’s 12-month price target at $34.48, suggesting moderate upside potential from current levels. The highest target stands at $40, while the lowest is $28.50, reflecting a mix of optimism and caution. Analysts seem to agree that EPRT is a well-managed REIT, but opinions diverge on whether its valuation leaves room for substantial growth.
These mixed ratings highlight the importance of balancing growth expectations with risks, particularly in the current economic environment. Investors should weigh both perspectives before making any decisions.
Earnings Report Summary
Essential Properties Realty Trust (EPRT) wrapped up its fourth-quarter earnings with solid numbers, showing steady growth while keeping a strong balance sheet. The company continues to expand its portfolio, but there were a few areas where results came in slightly lower than expected.
Financial Performance
EPRT reported net income per share of $0.30, which was a slight drop of 3% compared to the same period last year. On the flip side, funds from operations (FFO) grew by 2% to $0.47 per share, and adjusted funds from operations (AFFO) saw an even stronger jump, rising 7% to $0.45 per share. The AFFO increase is a good sign since it gives a clearer picture of the company’s cash flow available for dividends and reinvestment.
Investment Activity
The company remained active in both buying and selling properties. During the quarter, it acquired 78 new properties for $333.4 million, locking in a weighted average cap rate of 8.0%, which is a solid return for a net lease REIT. On the selling side, 24 properties were sold, bringing in $60.4 million, with a cap rate of 7.0%. The ability to buy at higher cap rates while selling at lower ones suggests EPRT is making smart portfolio moves.
Portfolio Overview
As of year-end, EPRT had 2,104 properties under its belt, with an impressive 99.7 percent occupancy rate. The average lease term on its properties stood at 14 years, providing reliable long-term income. One of the standout metrics was the rent coverage ratio of 3.5x, meaning tenants have more than enough earnings to cover their lease obligations. That’s a reassuring figure for investors looking for dividend stability.
Balance Sheet and Capital Markets
EPRT raised $78.9 million through its ATM (at-the-market) equity program, selling shares at an average price of $33.06. The company kept its debt levels in check, with a net debt-to-EBITDA ratio of 3.8x, which is fairly conservative for a REIT. Having lower leverage gives EPRT flexibility to keep growing even if interest rates stay high.
2025 Outlook and Dividend
Looking ahead, EPRT expects AFFO per share between $1.85 and $1.89 in 2025. The company is also targeting $900 million to $1.1 billion in new investments, showing confidence in future expansion.
On the dividend front, shareholders received some good news—the board declared a quarterly dividend of $0.295 per share, or $1.18 annually. The payout was distributed on January 14, 2025, to shareholders on record as of December 31, 2024.
CEO Pete Mavoides summed it up by saying that while competition in the market remains tough, EPRT’s strong financial position gives it plenty of room to seize opportunities. With a well-managed portfolio and steady cash flow, the company looks positioned to keep rewarding investors with reliable dividends.
Financial Health and Stability
The company’s financials are a mix of strengths and areas to watch.
- Revenue grew by 21.4% year-over-year, which is a strong sign.
- Net income for the trailing twelve months came in at $202.53 million, which is solid.
- Total debt stands at $2.13 billion, with a debt-to-equity ratio of 59.76%. This level of debt is manageable but requires monitoring.
- Cash on hand is $40.71 million, which isn’t a huge cushion, but the company benefits from steady cash flow due to long-term leases.
Overall, EPRT’s finances are stable, but the cost of debt could impact future growth.
Valuation and Stock Performance
At $32.29 per share, EPRT is trading near its 52-week high of $34.88. That suggests optimism from investors, though it also means there may be limited upside unless earnings growth continues.
Some valuation metrics to consider:
- Price-to-earnings (P/E) ratio is 28.08 (trailing) and 26.39 (forward). That’s relatively high for a REIT, meaning the stock isn’t cheap.
- Price-to-book ratio is 1.70, which suggests investors are paying a premium over the company’s asset value.
- Enterprise value-to-EBITDA is 20.12, which is on the higher side for the sector.
With a five-year beta of 1.39, EPRT is more volatile than the average REIT, so it may not be the best choice for investors seeking stability.
Risks and Considerations
- A high payout ratio above 100% raises concerns about sustainability, especially if growth slows.
- Interest rates remain a headwind, making new property acquisitions more expensive.
- The stock is trading near its 52-week high, which could limit near-term upside.
- Some tenants, such as restaurants and car washes, may struggle in an economic downturn, affecting rent collection.
That said, the company’s long-term lease structure provides some protection against short-term volatility.
Final Thoughts
Essential Properties Realty Trust has a lot to offer for dividend investors. It has a strong portfolio, steady revenue growth, and a reliable history of dividend increases. However, the current payout ratio is stretched, and the stock is trading at a relatively high valuation.
For those looking for a long-term dividend play, EPRT is worth keeping an eye on, but at current prices, waiting for a better entry point may be a wise move. With interest rates still high, the company’s ability to grow its dividend at the same pace as before could be tested in the coming years. Investors should track upcoming earnings reports and funds from operations (FFO) to gauge how well EPRT can maintain its dividend growth strategy.
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