4.6% a year from a landlord the market just sent to a 52-week low
The fastest-growing and least-indebted net-lease REIT in the U.S. has raised its guidance and dividend twice this year. Yet it is falling deeper than the sector giants. The reason is simple, but few see it - and it will decide how long the dividend keeps growing.
Key points
The company has raised its guidance and dividend twice this year, yet its stock is falling deeper than slower sector giants.
The share price hit a 52-week low the day after the Fed raised rates for the first time since 2023.
It leases car washes, preschools, and fitness centers - and that is both its strength and its biggest weakness.
Management pre-sold 18.9 million shares at $30.43, well above today's price. The stockpile will run out eventually.
In February 2027, the company faces a loan maturity at 2.26%. The CFO has already quantified what that will do to earnings.
A 52-week low the day after the rate hike
On Wednesday, September 16, the Fed raised rates for the first time since 2023, to a range of 3.75-4.00%. The day before, the 10-year U.S. Treasury yield hit 5.04%, the highest since summer 2007. And on Thursday, September 17, Essential Properties Realty Trust $EPRT fell to $26.56, its lowest in twelve months and about 23% below its year-to-date high of $34.73. The trigger was Mizuho, which cut its price target from $34 to $30.
At first glance, it looks like a familiar story: rates rise, real estate funds fall. But Essential Properties is not your typical falling REIT. It has already raised its earnings guidance twice this year, in July lifting its AFFO per share estimate to $2.01-2.05, up more than 7% year over year, and boosting its quarterly dividend to $0.32, or $1.28 annually. At today's price, based on dividends paid over the last twelve months, that's a yield of 4.6%, or even over 4.7% at the current rate.
And yet this "star pupil" is losing more than slower giants like Realty Income $O or Agree Realty $ADC . Why is the market punishing the fastest-growing player in the sector the hardest? The answer lies in where its growth actually comes from.