Real estate is a crucial component of commerce, as companies require physical locations to provide services to their customers. In order to expand and reach more consumers, companies often need capital to open new locations. This is where real estate investors come into play, as they can provide the necessary capital by acquiring and owning physical properties and leasing the space to operating tenants. This relationship allows the landlord to generate passive income on their investment.
One way for investors to participate in this passive income is by investing in a real estate investment trust (REIT) that owns income-generating real estate. Essential Properties Realty Trust (EPRT) is a great option for investors seeking a super safe income stream from real estate. Let’s take a closer look at what makes it an attractive choice for those looking for a reliable passive income stream.
Essential Properties Realty Trust owns a diversified commercial real estate portfolio that includes properties leased to tenants in various industries. The REIT’s portfolio consists of service-related properties (such as car washes, medical and dental locations, early childhood education sites, restaurants, and convenience stores), experience-related properties (like fitness centers, movie theaters, and entertainment locations), retail properties (such as grocery stores and home-furnishing stores), and industrial properties. With over 2,100 properties leased to 413 tenants in 16 industries across 49 states, Essential Properties Realty Trust has a well-diversified portfolio.
The REIT signs long-term net leases with tenants, with an average remaining lease term of 14 years. These leases provide stable rental income, as tenants cover all operating expenses, including maintenance, real estate taxes, and building insurance. Additionally, most of the leases have low fixed-rate escalations, resulting in steadily rising rental income for the REIT.
Essential Properties Realty Trust maintains a conservative financial profile, with a low dividend payout ratio and an investment-grade rated balance sheet. The REIT only pays out about two-thirds of its stable cash flow in dividends, allowing it to retain excess free cash flow to invest in additional income-producing properties. With a leverage ratio of 3.8 times, Essential Properties Realty Trust has a solid financial foundation.
The REIT primarily acquires additional properties through sale-leaseback transactions with existing and new partners. These deals provide partners with capital to invest in new locations while enabling the REIT to expand its portfolio of income-generating real estate. Essential Properties Realty Trust has been increasing its dividend every year since going public in 2018, providing investors with regular raises.
In conclusion, Essential Properties Realty Trust is an essential income stock for investors seeking a secure and reliable passive income stream. With a diversified portfolio of essential real estate, a low dividend payout ratio, and a conservative balance sheet, the REIT offers a solid investment opportunity. For those looking for a bankable passive income stream from real estate, Essential Properties Realty Trust is a top choice.
