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Is it Wise to Retain UDR Stock in Your Portfolio Right Now?

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UDR, Inc. (UDR - Free Report) , one of the most favorably-positioned multi-family apartment real estate investment trusts (REITs) in the United States, is set to benefit from its superior quality mix of A/B properties in both coastal and Sunbelt markets. Technological advancements and process enhancements also continue to aid the company’s growth curve.

Maintaining a diversified portfolio has been shielding the company from volatility and concentration risks, thus enabling it to generate steady operating cash flows. Moreover, suburban demand driven by favorable migration trends is likely to outpace occupancy, new lease rate growth, renewal rate growth and traffic compared with the urban communities in the future, thereby strengthening UDR’s financials.

UDR’s technological investments and process enhancements are expected to help control future expenses and aid margin expansion and long-term profitability. The company’s Next Generation Operating Platform supports electronical interaction, provides service to residents and aids its business prospects. These efforts are likely to give the company a competitive edge over its peers.

On the liquidity front, the company maintains disciplined capital allocation, sustained cash flows and an investment-grade balance sheet to support operational efficiency and dividend growth. It had $1.7 billion of liquidity through a combination of cash and undrawn capacity under its credit facilities as of Mar 31, 2022, and no consolidated maturities until 2024. Also, its credit-worthy ratings reduce its debt financing costs and lower the weighted average interest rate on debt.

UDR has consistently paid dividends, which remains a huge attraction for REIT investors. In March 2022, the residential REIT announced a hike in its annualized dividend by 4.7% to $1.52 per share. Considering its robust balance sheet position and a sustainable cash flow from operations, the company is likely to maintain its dividend payout in the forthcoming quarters.

Analysts seem to be bullish on this Zacks Rank #3 (Hold) stock. The estimate revisions trend for 2022 funds from operations (FFO) per share indicates a favorable outlook for the company as it has been increased 0.9% over the past month to $2.30. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, with rising supply volumes and a huge outlay of ongoing construction, acquiring renters for these properties could pose a challenge for UDR.

Although the allocation of capital for development programs aids the company’s long-term growth, a huge cost outlay of $689 million (at the end of first-quarter 2022) for its development pipeline could increase its exposure to operational risks like rising construction costs, entitlement delays, lease-up risks and funding risks.

Regulatory restrictions on renewal rate growth and fees on favorable terms along with elongated eviction or prohibited process could add to the company’s woes.

Shares of UDR have lost 13.3% in the past three months compared with the industry’s fall of 9.3%.

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Stocks to Consider

Some better-ranked stocks in the REIT sector are American Campus Communities , Independence Realty Trust (IRT - Free Report) and BRT Apartments (BRT - Free Report) .

The Zacks Consensus Estimate for American Campus Communities’ 2022 FFO per share has moved 0.8% upward in the past two months to $2.47. ACC presently carries a Zacks Rank of 2 (Buy).

The Zacks Consensus Estimate for Independence Realty Trust’s current-year FFO per share has moved roughly 1% northward in the past month to $1.05. IRT also carries a Zacks Rank of 2 at present.

The Zacks Consensus Estimate for BRT Apartments’ ongoing year’s FFO per share has been raised 18.5% over the past month to $1.54. BRT carries a Zacks Rank #1, currently.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

In-Depth Zacks Research for the Tickers Above

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United Dominion Realty Trust, Inc. (UDR) - free report >>

BRT Apartments Corp. (BRT) - free report >>

Independence Realty Trust, Inc. (IRT) - free report >>