The risk is that Wall Street has sold these REITs as growth companies, and this forces them to take risks for growth (like expanding just before the market turns down). The biggest risk is trying to force growth by more debt leverage. Let's call REITs income stocks with inflation protection, and forget trying to hype super multiples! The real estate cycle is not dead, just momentarily dormant. If MAA could maintain 4-5% growth witout increasing it would be a great long term investment.
REITs are NOT growth stocks, in our view. Imbedded in a conservative portfolio, with leverage in the 50% or so range, is something like 4% - 7% per year, depending upon numerous operating assumptions. Couple that with a big fat dividend (over 10% at present in our case), and you should reasonably expect to see an overall return (FFO/share growth plus dividend) of mid-teens. That's not "dot.com" stuff, but should be delivered year in, year out, "good" years and "bad" years - this housing is pretty fundamental stuff, folks. The track record for good apartment properties over the years: stable, predictable, unexciting, steady but low growth.
Not even changing our name to Midamerica.com would change it...
I couldn't agree with you more, joea40. I bought MAA for the good dividend, not for growth, to diversify my portfolio. I've got plenty of growth stock and don't really need another, particularly if the strategy for growth puts that dividend at risk. I'm treating this like a two-year note and even if I see no growth in the stock price I'm about 400 basis points better off than the 2-year treasury note, more than enough to compensate me for the greater risk from investing in MAA.
On another topic, just because the company says it's going to buy back stock doesn't mean that it will.