MAA (MAA), an apartment-only real estate investment trust (:REIT), has recently increased its quarterly dividend payout by 5.3% to 69.5 cents per share or $2.78 on an annualized basis. The dividend is payable on January 31, 2013 to shareholders of record on January 15.
The proposed dividend affirms a yield of 4.4% based on the closing price of $62.75 as on December 5, 2012. MAA is among a select group of companies who have maintained an uninterrupted dividend payout even during recession, when most companies had suspended the same. The company has historically paid cash dividends for 76 consecutive quarters and the present dividend hike signifies its continued strong operating performance, despite a challenging macroeconomic environment.
Investors looking for high dividend yields are increasingly favoring REITs like MAA. Solid dividend payouts are arguably the biggest enticement for REIT investors as the U.S. law requires REITs to distribute 90% of their annual taxable income in the form of dividends to shareholders.
Since its inception in 1994, MAA has evolved as a publicly-owned company from a portfolio of 6,000 apartments in the Mid-South area to a portfolio of 49,795 high-quality apartment homes spread across the Sunbelt region of the U.S.
The company typically divides its portfolio in two tiers – larger primary markets and lower population secondary markets. Secondary markets often have stable fundamentals due to limited new supply. Having a diversified presence in different types of markets helps mitigate risk and decreases volatility in the event of a slowdown in any one product type.
MAA’s diversified market profile with its focus on solid employment markets of the Sunbelt region across both the high-growth primary markets and the less cyclical secondary markets provides a stable earnings platform for the company.
With new supply remaining muted until late 2013 or 2014, we expect the multifamily sector to remain comparatively stable in the coming quarters, as renting has emerged as the only viable option for customers who could not get mortgage loans or are unwilling to buy a house at present.
We maintain our Neutral recommendation on MAA, which presently has a Zacks #3 Rank that translates into a short-term Hold rating. We also have a Neutral rating and a Zacks #3 Rank for UDR, Inc. (UDR), one of the competitors of MAA.
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