More often than not, higher-yielding dividend stocks have a higher risk profile. That's because they usually have high dividend payout ratios, putting the dividend at risk of reduction if their income falls. Because of that, EPR Properties (EPR -0.42%) 6%-yielding dividend would seem to be a higher risk payout. It's nearly double the dividend yield of the average real estate investment trust (REIT) and about four times higher than an S&P 500 index fund. 

However, a closer look at the numbers suggests its big-time payout is on rock-solid ground. One number, in particular, stands out. The REIT noted in the second quarter that it expects to produce $150 million in post-dividend free cash flow this year. That number showcases the strength of the REIT's ability to sustain its current dividend, making it a great dividend stock to buy.

Cashing in on experiences

EPR Properties reported its second-quarter financial results earlier this month. The company's experiential real estate portfolio performed well in the period, generating $88.7 million, or $1.17 per share, of funds from operations as adjusted (FFOAA). That was more than enough to cover the REIT's monthly dividend payment of $0.825 per share for the quarter. 

The REIT is now on track to produce between $4.50 and $4.60 per share of FFOAA for the year. That's an increase from its prior guidance range of $4.39 to $4.55 per share, thanks to its strong rental collection rate and its success in acquiring additional income-producing experiential real estate.

It's enough cash flow to cover the REIT's annual dividend outlay of $3.30 per share with an estimated $150 million to spare, thanks to its conservative dividend payout ratio of around 70%. 

This post-dividend free cash flow gives the REIT a huge cushion for the dividend. It also enables the company to retain cash to help fund new investments that expand its portfolio, saving it from having to issue a similar amount of equity to fund acquisitions.

Putting its financial flexibility to work

EPR Properties has been putting its financial flexibility to work this year. The company invested $214 million during the second quarter to acquire "several unique and top performing experiential properties...that fit our regional drive-to destination profile," according to comments by CEO Greg Silvers in the earnings press release. It purchased an 85% interest in an experiential lodging property for $50.6 million and spent $142.8 million to acquire two attraction properties in Canada. EPR also invested some capital into redevelopment projects and build-to-suite developments. That brought its investment total to $239.2 million during the first half.

Even with those deals, the REIT ended the second quarter with $168.3 million of cash on hand and no borrowings under its $1 billion revolving credit facility. It also has a strong investment-grade balance sheet with no debt maturities until 2024, giving it additional financial flexibility. When combined with its free cash flow, that strong liquidity position provides the REIT with the financial resources to continue making acquisitions. It expects to make $500 million to $700 million of investments this year. CEO Greg Silvers noted in the company's second-quarter earnings release that "we have an expanding pipeline of attractive opportunities and anticipate that our investment spending will continue to accelerate."

Those future deals will help grow the REIT's FFOAA per share because it's funding them through a mix of retained earnings, cash, and credit facility borrowings. That will put the company's high-yielding dividend payment on an even firmer foundation in the future. It should also enable EPR Properties to continue increasing its dividend. It already gave investors a 10% raise this year and could keep boosting the payout at a healthy rate in the future as acquisitions continue growing its FFOAA per share.

An excellent passive income producer

While EPR Properties pays a high-yielding dividend, that payout is relatively low risk. With the REIT on track to generate $150 million in post-dividend free cash flow this year, it has lots of cushion, enabling it to retain significant cash to help fund acquisitions. Those deals will help grow its FFOAA per share, potentially allowing the REIT to increase its lucrative dividend in the future. Add in the fact it makes monthly dividend payments, and it's an appealing passive income stock to buy.