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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) is well-poised to benefit from a diversified portfolio, with a superior product 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 while assuring stable cash flows. Moreover, in recent quarters, UDR has been experiencing strong pricing power, as evidenced by blended lease rate growth. For 2023, management expects year-over-year same-store revenue growth (on a cash basis) of 6-7%. Our estimate indicates a year over-year increase of 6.7% in same-store revenues in 2023.
UDR is also leveraging technological investments and process enhancements to drive innovation and margin expansion. Its Next Generation Operating Platform allows the company to electronically interact with and provide service to residents and prospects throughout its diversified portfolio. These efforts are likely to give UDR a competitive edge over its peers. For 2023, management expects year-over-year same-store net operating income (NOI) growth (on a cash basis) of 6.5-8%. We estimate year-over-year growth of 7.4% in the company’s same-store NOI in the current year.
The company maintains a healthy balance sheet position with ample liquidity. It exited the second quarter of 2023 with $1.1 billion liquidity. The company’s debt maturity schedule is well-laddered, with weighted average years to maturity of 6.3 and a weighted average interest rate of 3.21%. Also, 88.4% of its NOI is unencumbered.
Solid dividend payouts are arguably the biggest enticement for REIT investors and UDR remains committed to that. The company has increased its dividend five times in the last five years, and the five-year annualized dividend growth rate is 4.21%, which is encouraging.
Moreover, backed by healthy operating fundamentals, we expect the FFO as adjusted (FFOA) to increase 8.7% in 2023. Given our FFOA growth projections and UDR’s solid financial position, the latest dividend hike seems sustainable and well covered by cash flow from operations. Such efforts boost investors’ confidence in the stock.
Shares of this Zacks Rank #3 (Hold) company have gained 1.8% so far in the year, slightly below its industry’s increase of 2.1%.
Image Source: Zacks Investment Research
However, the struggle to lure the renters is likely to persist as the supply volume is expected to remain elevated in a number of its markets. With the ongoing construction standing at a high level, a sizeable number of apartment deliveries are expected in the upcoming period. Particularly, management expects its pricing power across its Sunbelt markets to remain constrained in the near term amid a relatively high level of new supply deliveries in these markets.
Furthermore, a high interest rate environment is a concern for UDR. Elevated rates imply high borrowing costs for the company, affecting its ability to purchase or develop real estate. The company has a substantial debt burden and its total debt as of Jun 30, 2023, was $5.4 billion. Our estimate indicates a year-over-year rise of 15.1% in interest expenses in 2023.
The Zacks Consensus Estimate for Invitation Homes’ current-year FFO per share has been revised marginally north over the past two months to $1.79.
The Zacks Consensus Estimate for American Homes 4 Rent’s 2023 FFO per share has been revised marginally north in the past month to $1.65.
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) is well-poised to benefit from a diversified portfolio, with a superior product 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 while assuring stable cash flows. Moreover, in recent quarters, UDR has been experiencing strong pricing power, as evidenced by blended lease rate growth. For 2023, management expects year-over-year same-store revenue growth (on a cash basis) of 6-7%. Our estimate indicates a year over-year increase of 6.7% in same-store revenues in 2023.
UDR is also leveraging technological investments and process enhancements to drive innovation and margin expansion. Its Next Generation Operating Platform allows the company to electronically interact with and provide service to residents and prospects throughout its diversified portfolio. These efforts are likely to give UDR a competitive edge over its peers. For 2023, management expects year-over-year same-store net operating income (NOI) growth (on a cash basis) of 6.5-8%. We estimate year-over-year growth of 7.4% in the company’s same-store NOI in the current year.
The company maintains a healthy balance sheet position with ample liquidity. It exited the second quarter of 2023 with $1.1 billion liquidity. The company’s debt maturity schedule is well-laddered, with weighted average years to maturity of 6.3 and a weighted average interest rate of 3.21%. Also, 88.4% of its NOI is unencumbered.
Solid dividend payouts are arguably the biggest enticement for REIT investors and UDR remains committed to that. The company has increased its dividend five times in the last five years, and the five-year annualized dividend growth rate is 4.21%, which is encouraging.
Moreover, backed by healthy operating fundamentals, we expect the FFO as adjusted (FFOA) to increase 8.7% in 2023. Given our FFOA growth projections and UDR’s solid financial position, the latest dividend hike seems sustainable and well covered by cash flow from operations. Such efforts boost investors’ confidence in the stock.
Shares of this Zacks Rank #3 (Hold) company have gained 1.8% so far in the year, slightly below its industry’s increase of 2.1%.
Image Source: Zacks Investment Research
However, the struggle to lure the renters is likely to persist as the supply volume is expected to remain elevated in a number of its markets. With the ongoing construction standing at a high level, a sizeable number of apartment deliveries are expected in the upcoming period. Particularly, management expects its pricing power across its Sunbelt markets to remain constrained in the near term amid a relatively high level of new supply deliveries in these markets.
Furthermore, a high interest rate environment is a concern for UDR. Elevated rates imply high borrowing costs for the company, affecting its ability to purchase or develop real estate. The company has a substantial debt burden and its total debt as of Jun 30, 2023, was $5.4 billion. Our estimate indicates a year-over-year rise of 15.1% in interest expenses in 2023.
Stocks to Consider
Some better-ranked stocks from the REIT sector are Invitation Homes Inc. (INVH - Free Report) and American Homes 4 Rent (AMH - Free Report) . Both Invitation Homes and American Homes 4 Rent currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Invitation Homes’ current-year FFO per share has been revised marginally north over the past two months to $1.79.
The Zacks Consensus Estimate for American Homes 4 Rent’s 2023 FFO per share has been revised marginally north in the past month to $1.65.
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.