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Growth & Income

Entertainment Properties Trust (EPR - Snapshot Report) offers investors strong growth and stellar income at a reasonable price.

Based on consensus estimates, analysts project 13% funds from operation (FFO) growth this year and 7% growth next year. And these estimates have been on the upswing after management raised its 2012 guidance following better than expected fourth quarter results.

It is a Zacks #2 Rank (Buy).

The company also recently raised its quarterly dividend by 7%. It currently yields a whopping 6.1%.


Entertainment Properties Trust is a real estate investment trust (REIT) that primarily invests in entertainment-oriented real estate like megaplex movie theatres and entertainment retail centers. It also owns public charter schools, ski resorts and wineries and vineyards.

The company is headquartered in Kansas City, Missouri and has a market cap of $2.2 billion.

Fourth Quarter Results

Entertainment Properties reported better than expected fourth quarter results on February 23. FFO per share came in at 91 cents, beating the Zacks Consensus Estimate by 3 cents. It was a 6% increase over the same quarter in 2010.

Total revenue rose 4% to $77.6 million, ahead of the Zacks Consensus Estimate of $71.0 million. Rental revenue, which accounted for 74% of total revenue, increased 2%.

Meanwhile, income from continuing operations increased 14% as the company leveraged its fixed expenses.

Estimates Rising

Management raised its guidance for 2012 following strong Q4 results. The company now expects 2012 FFO between $3.50 and $3.70, up from previous guidance of $3.44-$3.64.

This prompted analysts to revise their estimates higher, sending the stock to a Zacks #2 Rank (Buy). The Zacks Consensus Estimate for 2012 is now $3.61, representing 13% growth over 2011 FFO. The 2013 consensus estimate is 7% higher at $3.87.

The company plans to enter into 8-10 new build-to-suit theater investment in the first quarter and spend a total of $250-$350 million this year on new investments to drive long-term FFO growth.

Juicy Dividend

As a REIT, Entertainment Properties pays out the majority of its earnings to shareholders through dividends. It currently yields a whopping 6.1%.

The company did cut its dividend back in early 2009, but it has raised it twice since then. It is still about 17% below its pre-cut high, however.

Reasonable Valuation

The valuation picture looks reasonable for EPR. Shares trade at just 12.7x 12-month forward earnings, a discount to the industry median of 14.2x.

And its price to tangible book ratio is just 1.5, below the industry multiple of 1.8.

The Bottom Line

With rising estimates, strong growth, a juicy 6.1% yield and reasonable valuation, Entertainment Properties Trust offers attractive total return potential.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.

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