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Why Mid-America Apartment Communities (MAA) is a Great Dividend Stock Right Now

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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Mid-America Apartment Communities in Focus

Headquartered in Germantown, Mid-America Apartment Communities (MAA - Free Report) is a Finance stock that has seen a price change of -29.56% so far this year. Currently paying a dividend of $1.09 per share, the company has a dividend yield of 2.69%. In comparison, the REIT and Equity Trust - Residential industry's yield is 2.82%, while the S&P 500's yield is 1.76%.

Looking at dividend growth, the company's current annualized dividend of $4.35 is up 6.1% from last year. Over the last 5 years, Mid-America Apartment Communities has increased its dividend 5 times on a year-over-year basis for an average annual increase of 4.19%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Mid-America Apartment Communities's current payout ratio is 59%. This means it paid out 59% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, MAA expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $8.17 per share, which represents a year-over-year growth rate of 16.55%.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that MAA is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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