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Is it Wise to Retain UDR Stock in Your Portfolio for Now?
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UDR, Inc. (UDR - Free Report) has properties located throughout the United States, which includes a mix of A/B quality properties in urban and suburban communities in both coastal and Sunbelt locations. The company’s efforts to diversify its portfolio with respect to geographies and price points limit its exposure to volatility and concentration risks alongside assuring stable cash flows.
Additionally, a favorable demographic trend in the young-adult age cohort, which has a higher propensity to rent, is likely to fuel the demand for UDR’s properties.
UDR is also leveraging technological investments and process enhancements to drive innovation and margin expansion. Its 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.
The company maintains a healthy balance-sheet position with ample liquidity. It exited third-quarter 2022 with $1.1 billion of liquidity. The company has a well-laddered debt maturity schedule and no consolidated maturities until 2024.
Also, investment-grade credit ratings of Baa1(Stable) and BBB+(Stable) from Moody's Investors Service and S&P Global Ratings, respectively, render it favorable access to the debt market. With enough financial flexibility, UDR is well-poised to capitalize on long-term growth opportunities.
Solid dividend payouts are the biggest enticement for REIT investors, and UDR remains committed to that. It has increased its dividend five times in the last five years, and the five-year annualized dividend growth rate is 4.22%. Given its solid financial position and strong cash flows from operations, the company’s dividend payment seems sustainable.
Shares of this Zacks Rank #3 (Hold) company have lost 7.7% in the past three months compared with its industry’s fall of 9.9%.
Image Source: Zacks Investment Research
Nonetheless, stiff competition from other housing alternatives like rental apartments, condominiums and single-family homes restricts UDR from raising rents, stalling its growth pace. Moreover, regulatory restrictions regarding rent control or rent stabilization by certain states and municipalities have been limiting the residential REITs’ power to raise rents or charge non-rent fees.
UDR’s huge development pipeline, although encouraging for long-term growth, is a matter of concern as it exposes the company to various operational risks, such as a rise in construction costs, entitlement delays, lease-up risks and funding risks.
Further, rising interest rates are likely to increase borrowing costs, affecting the company’s ability to purchase or develop real estate.
The Zacks Consensus Estimate for VICI Properties’ current-year FFO per share is pegged at $1.92.
The Zacks Consensus Estimate for Lamar Advertising’s 2022 FFO per share is pegged at $7.34.
The Zacks Consensus Estimate for Chatham Lodging Trust’s ongoing year’s FFO per share is pegged at $1.17.
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.
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Is it Wise to Retain UDR Stock in Your Portfolio for Now?
UDR, Inc. (UDR - Free Report) has properties located throughout the United States, which includes a mix of A/B quality properties in urban and suburban communities in both coastal and Sunbelt locations. The company’s efforts to diversify its portfolio with respect to geographies and price points limit its exposure to volatility and concentration risks alongside assuring stable cash flows.
Additionally, a favorable demographic trend in the young-adult age cohort, which has a higher propensity to rent, is likely to fuel the demand for UDR’s properties.
UDR is also leveraging technological investments and process enhancements to drive innovation and margin expansion. Its 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.
The company maintains a healthy balance-sheet position with ample liquidity. It exited third-quarter 2022 with $1.1 billion of liquidity. The company has a well-laddered debt maturity schedule and no consolidated maturities until 2024.
Also, investment-grade credit ratings of Baa1(Stable) and BBB+(Stable) from Moody's Investors Service and S&P Global Ratings, respectively, render it favorable access to the debt market. With enough financial flexibility, UDR is well-poised to capitalize on long-term growth opportunities.
Solid dividend payouts are the biggest enticement for REIT investors, and UDR remains committed to that. It has increased its dividend five times in the last five years, and the five-year annualized dividend growth rate is 4.22%. Given its solid financial position and strong cash flows from operations, the company’s dividend payment seems sustainable.
Shares of this Zacks Rank #3 (Hold) company have lost 7.7% in the past three months compared with its industry’s fall of 9.9%.
Image Source: Zacks Investment Research
Nonetheless, stiff competition from other housing alternatives like rental apartments, condominiums and single-family homes restricts UDR from raising rents, stalling its growth pace. Moreover, regulatory restrictions regarding rent control or rent stabilization by certain states and municipalities have been limiting the residential REITs’ power to raise rents or charge non-rent fees.
UDR’s huge development pipeline, although encouraging for long-term growth, is a matter of concern as it exposes the company to various operational risks, such as a rise in construction costs, entitlement delays, lease-up risks and funding risks.
Further, rising interest rates are likely to increase borrowing costs, affecting the company’s ability to purchase or develop real estate.
Stocks to Consider
Some better-ranked stocks from the REIT sector are VICI Properties (VICI - Free Report) , Lamar Advertising (LAMR - Free Report) and Chatham Lodging Trust REIT (CLDT - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for VICI Properties’ current-year FFO per share is pegged at $1.92.
The Zacks Consensus Estimate for Lamar Advertising’s 2022 FFO per share is pegged at $7.34.
The Zacks Consensus Estimate for Chatham Lodging Trust’s ongoing year’s FFO per share is pegged at $1.17.
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.