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Here's Why You Should Hold Mid-America Apartment Stock Now
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Mid-America Apartment Communities, Inc. (MAA - Free Report) — commonly referred as MAA — is poised to benefit from favorable household formation trends and demographics. However, hike in interest rate remains a challenge for this apartment real estate investment trust (REIT).
Notably, positive demographic trends — supported by growth of prime age groups for rentals and migration of population to the Southeast and Southwest — will likely drive household formation and apartment rental demand in its markets. With a diverse portfolio and a strong foothold across the Southeast and Southwest regions of the United States, MAA remains well positioned to leverage on the scenario.
Also, encouraging job growth and favorable tax structure in its markets are expected to attract employers and spur demand for the company’s properties. The company also enjoys a solid balance sheet with lower leverage, improved investment grade metrics and limited near-term maturities. As of Sep 30, 2018, MAA held cash and cash equivalents of nearly $46.1 million, significantly up from approximately $10.8 million as of Dec 31, 2017.
Impressive financial muscle has enabled MAA to pay decent dividend to shareholders. Recently, it hiked its dividend payout by 4.1% to 96 cents. Specifically, with this increase, common shareholders of the company have been rewarded with 217% overall growth in common dividend, denoting an annualized 4.7% return since the initial common dividend payment.
However, hike in interest rates might dent the company’s ability to maintain its dividend payout. Essentially, rising rates imply higher net interest expense on the company’s borrowings. In addition, it escalates borrowing cost for new and refinancing debt for the company, which would affect the company’s ability to purchase or develop real estate and lower dividend payouts as well.
Further, elevated supply of new housing units in a number of MAA’s urban sub-markets is expected to adversely impact its capability to demand more rents and results in lesser absorption. In fact, the company anticipates supply to remain elevated in Austin, Charlotte and Washington D.C. in 2019. This is likely to put pressure on rental rates and affect revenue growth in the near term.
Geographic concentration of assets in the Southeast and Southwest regions of the United States makes the company vulnerable to any adverse development in the general economic conditions of these regions.
Also, shares of this Zacks Rank #3 (Hold) company have underperformed the industry it belongs to, in the past three months. While the stock has declined 4.1%, the industry has incurred loss of 1.9% during this period.
Equity Residential’s funds from operations (FFO) per share estimates for 2018 has remained unchanged at $3.26 in the last 30 days.
PS Business Parks’ Zacks Consensus Estimate for 2018 FFO per share moved 1.3% north to $6.45 in the past two months.
OUTFRONT Media’s FFO per share estimates for the current year has been revised 2% upward to $2.09 in two months’ time.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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Here's Why You Should Hold Mid-America Apartment Stock Now
Mid-America Apartment Communities, Inc. (MAA - Free Report) — commonly referred as MAA — is poised to benefit from favorable household formation trends and demographics. However, hike in interest rate remains a challenge for this apartment real estate investment trust (REIT).
Notably, positive demographic trends — supported by growth of prime age groups for rentals and migration of population to the Southeast and Southwest — will likely drive household formation and apartment rental demand in its markets. With a diverse portfolio and a strong foothold across the Southeast and Southwest regions of the United States, MAA remains well positioned to leverage on the scenario.
Also, encouraging job growth and favorable tax structure in its markets are expected to attract employers and spur demand for the company’s properties.
The company also enjoys a solid balance sheet with lower leverage, improved investment grade metrics and limited near-term maturities. As of Sep 30, 2018, MAA held cash and cash equivalents of nearly $46.1 million, significantly up from approximately $10.8 million as of Dec 31, 2017.
Impressive financial muscle has enabled MAA to pay decent dividend to shareholders. Recently, it hiked its dividend payout by 4.1% to 96 cents. Specifically, with this increase, common shareholders of the company have been rewarded with 217% overall growth in common dividend, denoting an annualized 4.7% return since the initial common dividend payment.
However, hike in interest rates might dent the company’s ability to maintain its dividend payout. Essentially, rising rates imply higher net interest expense on the company’s borrowings. In addition, it escalates borrowing cost for new and refinancing debt for the company, which would affect the company’s ability to purchase or develop real estate and lower dividend payouts as well.
Further, elevated supply of new housing units in a number of MAA’s urban sub-markets is expected to adversely impact its capability to demand more rents and results in lesser absorption. In fact, the company anticipates supply to remain elevated in Austin, Charlotte and Washington D.C. in 2019. This is likely to put pressure on rental rates and affect revenue growth in the near term.
Geographic concentration of assets in the Southeast and Southwest regions of the United States makes the company vulnerable to any adverse development in the general economic conditions of these regions.
Also, shares of this Zacks Rank #3 (Hold) company have underperformed the industry it belongs to, in the past three months. While the stock has declined 4.1%, the industry has incurred loss of 1.9% during this period.
Stocks to Consider
Better-ranked stocks from the REIT space include Equity Residential (EQR - Free Report) , PS Business Parks, Inc. and OUTFRONT Media Inc. (OUT - Free Report) . Each of these stocks carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Equity Residential’s funds from operations (FFO) per share estimates for 2018 has remained unchanged at $3.26 in the last 30 days.
PS Business Parks’ Zacks Consensus Estimate for 2018 FFO per share moved 1.3% north to $6.45 in the past two months.
OUTFRONT Media’s FFO per share estimates for the current year has been revised 2% upward to $2.09 in two months’ time.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>