Essential Properties Realty Trust Is Still A Buy - Here's Why

Investment Thesis - Essential Properties Realty Trust (EPRT) is guided by an effective investment strategy, resulting in elite-level business metrics and outperforming many popular triple-net lease REITs in terms of AFFO per share growth and dividend growth [1][34] Company Overview - EPRT is a service-oriented triple-net lease REIT with 1,937 properties owned as of March 2024, with 79.8% of ABR derived from service-oriented properties [3][34] - The company has a well-diversified portfolio across 48 states, with approximately 80% of ABR generated from the top 21 states and around 50% from Sunbelt states [18][19] Business Metrics - EPRT maintains a high occupancy rate of 99.9% as of March 2024, outperforming peers Agree Realty (99.6%) and NNN REIT (99.4%) [9] - The weighted average lease term (WALT) for EPRT is 14.1 years, significantly higher than peers ADC (8.2 years) and NNN (10.0 years) [11] - EPRT's weighted average annual rent escalation rate is 1.7%, with 98.8% of its ABR subject to such increases [15][16] Dividend and AFFO Growth - EPRT has achieved a compound annual growth rate (CAGR) of 6.2% in dividends from 2020 to 2023, with a forward-looking dividend yield of approximately 4.2% [22] - The company outperformed peers in AFFO per share growth during the same period, achieving a CAGR of 9.7% compared to ADC's 6.9% and NNN's 3.9% [23][24] Financial Position - EPRT has a solid balance sheet with a BBB credit rating, 100% of its debt at a fixed rate, and a fixed charge coverage ratio of 5.9x, the highest among its peers [27][29] - The company has strong liquidity of $863.3 million, ensuring it can address near-term investment opportunities [29] Valuation Outlook - The forward-looking P/FFO multiple for EPRT is expected to appreciate to a range of 15.5x-16.0x, reflecting its unique investment approach and solid financial stance [31][35]