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5 Reasons to Add Mid-America Apartment (MAA) Stock Right Now

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Residential REITs are anticipated to benefit in the upcoming days as the rental housing demand remains robust, with young adults forming new households and the job market showing an improvement. While gateway metros are showcasing a strong rebound, product absorption continues in Sun Belt markets, making Mid-America Apartment Communities, Inc. (MAA - Free Report) , commonly known as MAA, a solid addition to your portfolio.

Shares of Zacks Rank #2 (Buy) MAA have outperformed the industry in the past year. The company’s shares have rallied 10.5%, while the industry has declined 2.9% over this period. Given its strong fundamentals, there is room for further price appreciation. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Factors That Make MAA a Solid Choice

MAA’s diversified Sun belt portfolio of suburban-focused communities was less severely affected by the pandemic and the economic shutdown. The pandemic has accelerated employment shifts and a population inflow into the company’s markets as renters seek more business-friendly, lower-taxed and low-density cities. These favorable longer-term secular dynamic trends are increasing the desirability of its markets. Amid this, MAA is well-poised to capture recovery in demand and leasing compared with expensive coastal markets.

MAA continues to implement programs like interior redevelopment, property repositioning projects and Smart Home installations. The programs will help the company capture the upside potential of rent growth, generate accretive returns and boost earnings from its existing asset base in 2022. The company completed 1098 interior unit upgrades and 11,018 Smart Home packages in the first quarter of 2022. In 2022, the company plans to complete more than 6,000 interior unit upgrades and approximately 23,000 Smart Home packages. By the end of the year, management projects the total number of smart units to reach 71,000. In addition, MAA completed the repositioning work at eight properties and is at the final stage of repricing leases.

MAA enjoys a solid balance sheet, with low leverage and ample availability under its revolving credit facility. As of Mar 31, 2022, the company has $1.0 billion in combined unrestricted cash and cash equivalents and available capacity under its revolving credit facility. It generated a 95.2% unencumbered net operating income in the first quarter of 2022, providing the scope for tapping additional secured debt capital if required. Hence, with manageable near-term maturities and funding obligations, the company is well-positioned to bank on growth scopes.

Solid dividend payouts are arguably the biggest enticements for REIT shareholders and MAA remains committed to that. In May 2022, the company announced a common stock cash dividend of $1.25 per share, marking a 15% hike over the prior payout. Moreover, in December 2021, the company announced a common stock cash dividend of $1.0875 per share, which marked a 6.1% sequential hike and the 12th consecutive annual increase in the company’s dividend. Given its financial strength and lower payout ratio compared with the industry, the company’s dividend payout is expected to be sustainable.

The estimate revision trend for full-year 2022 funds from operations (FFO) per share indicates a favorable outlook for the company as estimates have been revised upward by 1.5% in the past month. Given the progress in fundamentals and upward estimate revisions, the stock has more room to rally in the near term.

Other Key Picks

Some other key picks from the REIT sector include BRT Apartments Corp. (BRT - Free Report) and Independence Realty Trust, Inc. (IRT - Free Report) .

BRT Apartments sports a Zacks Rank of 1 at present. BRT Apartments’ long-term growth rate is projected at 6%.

The Zacks Consensus Estimate for BRT’s 2022 FFO per share has been revised 18.5% upward in the past month to $1.54.

The Zacks Consensus Estimate for Independence Realty Trust’s 2022 FFO per share has moved marginally north to $1.05 over the past month.

Currently, Independence Realty Trust carries a Zacks Rank of 2.

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


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MidAmerica Apartment Communities, Inc. (MAA) - free report >>

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