EPR Properties: Is Coronavirus Fear Justified?

Entertainment REIT EPR Properties has gotten slammed in the coronavirus panic. Are the shares cheap?

EPR Properties (EPR) has gotten utterly annihilated during this market selloff. It was down 36% yesterday alone and is down 65% from its 52-week highs.

It’s easy to write off a move like that as “irrational.” But is it? As a REIT specializing in entertainment properties, does the coronavirus panic materially impact the company?

The short answer is “yes,” but probably nowhere near enough to justify the destruction of the shares.

EPR had its quarterly investor call at the end of February, and one of the analysts brought up coronavirus and how it might affect the company:

Analyst: Okay, okay. And then just one last one for me. I don’t know if you guys have this off hand. But just when SARS hit early in the 2000s. Kind of do you remember what the impact was on theater attendance or kind of the Experiential retail tenants that you guys kind of invest in? Vis-à-vis, what could happen if the Coronavirus continues to spook people?

EPR CEO Greg Silver: Sure. It’s actually a great question, Craig. And we went back, and I’ve gone back and looked at it. And it really did have a negligible effect. If you recall, SARS actually affected Canada more than it did the U.S. It showed up mainly in Toronto. So if you use that as a kind of a set, it was really impactful for about 20 to 35 days, but to the overall year, it had a negligible effect.

Now, coronavirus is different, of course. While far less deadly, the economic impact is likely to be far worse due to the reaction to it: quarantines, closures of public events, etc. None of this is good for a company that in the business of entertaining people in large groups.

It’s important to remember that EPR is a landlord and is not running an entertainment business itself. But its tenants are going to take a lot of pain this year. And if movie ticket sales are affected, its largest tenant — AMC — could get into some real trouble.

None of this should be bad enough to put EPR at serious risk or even cause it to cut its dividend, assuming life gets more or less back to normal within the next month or two.

Meanwhile, the company has opted to hoard cash as a precautionary measure. EPR recently walked away from a planned $1 billion gaming investment, which will likely lower earnings and funds from operations for the year. But it was likely the right move, all things considered.

This is by no means an in-depth analysis. This are simply my initial thoughts after seeing the stock implode this week, and I’ll do a deeper dive on the company in the days ahead. But for now, if you’re looking for gems amidst the rubble, EPR is worth a look. At current prices, it sports a gargantuan 16% dividend yield.

It’s worth noting that EPR cut its dividend during the 2008 financial crisis by about a quarter and that it took several years to return the dividend to pre-crisis levels. Depending on how long the coronavirus scare lasts and what sort of financial mess its tenants face, something like that could happen again. But at current prices, it would seem worth the risk.

Disclosures: Long EPR

Defensive Dividend Stocks Beating the Correction

These 11 defensive dividend stocks are rising while the market crashes.

The following orginally appeared on Kiplinger’s.

Remember when 1,000-point moves in the Dow where a big deal?

Lately, they’ve become almost commonplace. The Dow fell by just shy of 1,000 points on March 3 after rallying by more than 1,200 points on March 2. This follows a week in which the Dow closed down by more than 1,000 twice and down 879 another day.

That’s some monster volatility. Yet despite the market turmoil, a handful of defensive dividend stocks are keeping their heads above water. It’s an eclectic group, but you do see some common threads. Many are in basic industries that aren’t particularly sensitive to economic growth or virus fears, such as packed foods and grocery stores. Many are low-beta stocks – shares that are less volatile than the broader market. And most pay above-average dividends, which helps to smooth out the ups and downs of the share price swings.

These survivors also are a little off the beaten path and don’t have much representation on the major stock indexes. That matters because when investors dump index funds, the mega-cap stocks that dominate the Dow, S&P 500 and Nasdaq often get hit hard.

“Aggressive selling in the indexes can translate into aggressive selling in historically strong stocks such as Apple (AAPL), Microsoft (MSFT) and the other trillion-dollar names,” says Mario Randholm, portfolio manager at alternative investments firm Randholm & Co. “It’s hard to picture a scenario in which all these dominant names will continue to outperform during a broad-market selloff.”

Today, we’re going to take a look at 11 low-beta, defensive dividend stocks that have been keeping their heads above water. 

As of the time of this writing, all were not only outperforming the market since the correction began Feb. 19, but most were clinging to at least modest gains. Those gains might prove to be tenuous if the market takes another leg down. But at the very least, these stocks seem better-positioned to sustain less damage than most of their peers.

We’ll start with Flowers Foods (FLO, $22.88), a packaged bakery goods company selling its wares under Nature’s Own, Wonder, Dave’s Killer Bread, Sunbeam and other brands. The company is headquartered in Atlanta and operates 47 bakeries spread across the country.

Consumption of bread, snack cakes and tortillas isn’t much of a concern during a recession. Indeed, stressed consumers often trade down to cheaper options and succumb to eating comfort food.

“Flowers Foods has been a staple in our all-weather portfolios for months,” according to Sonia Joao, a Registered Investment Advisor (RIA) based in Houston, Texas. “Our clients appreciate the fact that it’s a sleep-at-night investment that won’t give them heartburn.”

Flower Foods’ status among defensive dividend stocks garnered it a place among our best retirement stocks to buy in 2020. It’s a low-volatility play with a beta of just 0.33. The benchmark beta is set against (in this case, the S&P 500) is 1, so this effectively means FLO is approximately one-third as volatile as the broader market.

Flowers not only has survived the market’s turbulence so far, but has put up a small gain since the start of the correction. It pays a nice 3%-plus dividend to boot.

To continue reading, please see 11 Defensive Dividend Stocks for Riding Out the Storm.

Stocks to Ride Out the Coronavirus Scare

Coronavirus fears are hitting the stock market hard. But some companies, particular home delivery and home entertainment services, are poised to profit.

The following first appeared on Kiplinger’s as 11 Best Stocks to Ride Out the Coronavirus Outbreak

It’s never reassuring when you see news footage of quarantined tourists stuck on cruise ship, or when the Homeland Security agent gives your passport an extra hard look for recent visits to China. But when you see Venice cancelling its annual Carnival and the entire country of Italy on effective lockdown, that’s it really starts to feel real.

Health scares can really spook the market, as we saw on Monday and Tuesday. But we still have portfolios to manage, even if it seems like the world is ending.

The winners and losers in these situations aren’t always obvious at first. The same company that benefits from a stockpiling of supplies or a surge in home delivery might also suffer from supply chain disruptions, particularly if they source from China. That’s what makes this challenging but ultimately rewarding.

It’s safe to assume that this too will pass. This isn’t the first global flu scare, and it’s not likely to be the last.

It’s also important to keep things in perspective. While the data on coronavirus is still patchy, it doesn’t appear to be exceptionally lethal. The death rate is only about 2.3%, and the real rate could actually be lower. We have no way of counting early carriers of the virus who may have been misdiagnosed with flu or the common cold.

To put that in perspective, the good, old-fashioned flu only kills about 0.13% of those that catch it, but the SARS and MERS viruses had death rates of 9.5% and 34.5%, respectively.

But while the coronavirus is far less deadly, its effects on the economy will likely be much worse. When SARS hit the Chinese economy in 2003, China accounted for just 4.2% of the world economy, according to IHS Markit. Today, the Chinese economy makes up 16.3% of the economy. So any pronounced slowdown in China is going to be felt around the world.

We’ll get through this. But in the meantime, let’s look at stocks that are poised to survive and thrive regardless of how bad this pandemic gets.

Amazon.com (AMZN)

Amazon.com (AMZN) is taking over the world. This is essentially a foregone conclusion at this point. The ease of ordering on their website makes going to a mall seem almost old timey and quaint. Whether it’s a new computer, clothing or even your weekly groceries, chances are good you can buy it on Amazon and at a reasonable price.

And beyond retail, Amazon is also the dominant provider of cloud computing services to companies, government agencies and even regular Janes and Joes via its AWS platform. The list of major companies using AWS are a virtual who’s who list. Apple (AAPL) reported spends more than $30 million per month on AWS, and Netflix (NFLX), Lyft (LYFT), McDonald’s (MCD), Johnson & Johnson (JNJ) and even the U.S. Department are all noteworthy users.

If that wasn’t enough, Amazon also goes head to head with Netflix and Disney (DIS) in video streaming.

The bullish case here is pretty straightforward. If more and more people opt to avoid crowded public spaces, companies like Amazon that bring goods to your door and streaming video services to your computer, phone or TV stand to benefit.

Amazon won’t get through this completely unscathed. The company depends on goods coming from China, so disruptions to its supply chain due to employee absenteeism or factory closures could create problems, particularly during Amazon’s annual Prime Day. It’s something Amazon is taking very seriously and taking steps today to mitigate.

But it’s important to note that any hiccups will be short-term in nature, whereas customers that embrace delivery from Amazon during the virus scare aren’t likely to give up the convenience once it blows over.

To continue reading, see Best Stocks to Ride Out the Coronavirus Outbreak

7 High-Yield Dividend Sin Stocks

“Sin stocks” in politically incorrect sectors like energy and tobacco can offer enticing dividend yields.

The following originally appeared on Kiplinger’s as 7 Dividend-Rich Sin Stocks to Buy Now.

Pop culture has always loved the bad boy. From James Dean’s Jim Stark in Rebel Without a Cause to Harrison Ford’s Han Solo of Star Wars fame, everyone roots for the lovable rogue. But that’s generally not true in the stock market, where “sin stocks” or “vice stocks” often get the stink eye.

Investors, and particularly large institutional investors, have reputations to manage. Pensions and endowments, in particular, increasingly have environmental, social and corporate governance (ESG) mandates that prohibit them from investing in industries that are politically incorrect or deemed to be socially harmful.

In the past, this has generally meant vice stocks such as tobacco, alcohol, tobacco, gambling and even defense companies. (No one in polite company wants to be branded as a merchant of death.) But today, the net is cast a little wider. Oil and gas stocks are now personae non gratae in many ESG-compliant portfolios, as are opioid-producing pharmaceuticals. Companies with a lack of diversity on their boards of directors are also often singled out.

Of course, if we take this to an extreme, nearly any industry could find itself blacklisted. Coca-Cola (KO) and PepsiCo (PEP) contribute to the obesity epidemic. Twitter (TWTR) and Facebook (FB) have become mediums for hate speech, and Alphabet (GOOGL) tracks a scary amount of data on its users that could be used for nefarious purposes.

The point here is not to justify bad behavior by companies or knock the idea of socially responsible investing, however. If you find a company’s products or business practices objectionable, there’s nothing wrong with excluding it from your portfolio. But a sin stock that one person finds objectionable might be personally fine to another. Some of the best stocks of the past decade included companies that glued people to their sofas and stuffed them with carbs.

Today, we’re going to look at seven of the best sin stocks to buy now. Betting against the least ESG-friendly of stocks isn’t without its risks. But if you’re willing to dip your toe into sectors that are politically incorrect, the rewards can be substantial. And most of these picks offer value pricing and/or significant dividend yield.

To keep reading, please see 7 Dividend-Rich Sin Stocks to Buy Now.

11 Stocks to Buy That Prove Boring Is Beautiful

The following first appeared on Kiplinger’s as 11 Stocks to Buy That Prove Boring Is Beautiful.

Stocks aren’t all that different than cars, in some ways. Sure, the Ferrari is a lot of fun to drive, and you look cool sitting behind the wheel. But it’s also going to cost you a fortune, and high-performance cars spend a lot of time at the mechanic’s shop.

Now, compare that to a Honda Civic. You never really notice a Honda Civic on the road. It’s utterly forgettable. But it’s also just about indestructible, requires virtually no attention from you, and it quietly and efficiently does its job.

Consider that mentality when you’re tracking down stocks to buy. A highflying growth pick can be a lot of fun to own. You look smart owning it, and it’s fun to talk about at parties. But when the market’s mood swings the other way, you’re often left with some nasty losses and a bruised ego. Meanwhile, that dividend-paying value stock in your portfolio might not be particularly interesting. But over the long haul, it’s a lot less likely to give you problems. Like that Honda Civic, it will quietly do its job with no stress and no drama.

“Some of our most profitable trades over the years have been some of our most boring,” explains Chase Robertson, principal of Houston-based RIA Robertson Wealth Management. “We’ve done well for our clients by mostly avoiding the trendy sectors and focusing instead on value and income.”

Here are 11 boring but beautiful dividend stocks to buy now. They might not be much to look at, but they’re likely to get the job done over the long term. And when you need them most – in retirement – they’ll be less likely to break down on you.

AT&T

AT&T (T) has been a boring play for many years now. Even its seemingly transformative recent buyout of Time Warner (which owns HBO, Cinemax, TBS and TNT) was a drawn-out affair that got bogged down in court battles.

It seems almost silly now, but in the late 1990s and early 2000s, AT&T was a bubble stock. Investors couldn’t get enough of everything related to telecommunications, and AT&T delivered the goods. But when the bubble burst, AT&T crashed hard. Today, nearly 20 years after the peak of the internet mania, T shares still are more than 40% below their old highs.

Of course, 20 years later, AT&T is a very different company. Its mobile and home internet businesses are mature, and its paid TV business is actually shrinking, albeit slowly. AT&T is essentially a utility stock. But T belongs on any short list of boring stocks to buy now given its current pricing.

AT&T took a tumble in 2018 that brought it to its most attractive prices in recent memory. The stock has recovered somewhat, but not completely, and still offers a value at less than 10 times analysts’ expectations for future profits, and a fat dividend yield of 5.9%.

Are you going to get monster growth from AT&T? Of course not. But modest capital appreciation and high levels of income should deliver a very respectable total return.

To continue reading, please see 11 Stocks to Buy That Prove Boring Is Beautiful.