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Home Properties, Inc. (HME) continues to benefit from a struggling housing market. The apartment REIT has seen an increase in both rents and occupancy rates as more and more Americans opt to rent rather than buy.

Home Properties recently delivered strong fourth quarter 2011 results and management gave bullish guidance for 2012. This prompted analysts to revise their estimates higher, sending the stock to a Zacks #2 Rank (Buy).

The company also pays a dividend that yields a juicy 4.6%.

Company Description

Home Properties, Inc. is an apartment REIT with properties primarily in selected Northeast and Mid-Atlantic markets. The company owns and operates 124 communities containing 41,951 apartment units.

It is headquartered in Rochester, New York and has a market cap of $2.8 billion.

Fourth Quarter Results

Home Properties delivered better than expected fourth quarter results on February 9. Funds from operation (FFO) per share came in at 93 cents, beating the Zacks Consensus Estimate of 89 cents. It was an 11% increase over the same quarter in 2010.

Total revenue was up 12% year-over-year to $153 million, ahead of the Zacks Consensus Estimate of $149 million. Average monthly rents rose 4.7% year-over-year to $1,195 while physical occupancy climbed 20 basis points to 95.3%.

These factors led to a 9% increase in net operating income over the same period.


Following a strong 2011, management provided 2012 FFO guidance of $3.79-$3.95 per share, prompting analysts to increase their estimates. This sent the stock to a Zacks #2 Rank (Buy).

The Zacks Consensus Estimate for 2012 is now $3.89, within guidance, and representing 10% growth over 2011 FFO. The 2013 consensus estimate is currently $4.15, corresponding with 7% growth.

Expect both rents and occupancy rates to continue rising in 2012 given the strong demand for apartments.


In addition to solid growth, Home Properties pays a dividend that yields a stellar 4.6%. The company did cut its dividend in early 2010 but has raised it twice since then. It is currently a penny below its pre-cut high.


The valuation picture looks reasonable for HME. Shares trade at 14.8x 2012 FFO, in-line with the industry median and its 10-year median.

Its price to tangible book value ratio of 2.0 is also in-line with its peers and its historical multiple.

The Bottom Line

With favorable industry trends, rising estimates, a 4.6% yield and reasonable valuation, Home Properties offers a lot too like.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.

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