Mid-America Apartment Communities, Inc. MAA — commonly known as MAA — is a promising stock, presently, backed by its organic growth strategies which place it strategically for further growth. Moreover, the company’s earnings growth prospects and industry tailwinds make it an attractive pick.
Additionally,with a well-balanced, diverse portfolio across the Sunbelt region of the United States, MAA is well poised to enjoy the improving leasing dynamics in the region. In fact, the company’s portfolio is well diversified in terms of markets, submarkets, product types and price points, cushioning it from economic downturn in any particular market, turbulence in any product-type or assets belonging to specific price points. This, in turn, helps maintain a consistent revenue stream for the company.
Cousins Properties not only beat estimates in the last reported quarter, but has also been witnessing upward estimate revisions, reflecting analysts’ optimism about its prospects. Over the past 30 days, the Zacks Consensus Estimate for 2019 funds from operations (FFO) per share has moved north marginally.
Further, this Zacks Rank #2 (Buy) stock has gained around 11.2% over the past three months, outperforming 7.4% growth recorded by the industry. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Notably, MAA has a number of other aspects that make it an attractive investment option.
Why the Stock is an Attractive Pick
Favorable industry fundamentals: The current year’s prime leasing period was encouraging for the U.S. apartment market as reflected by decent rent growth and increasing occupancy level. In fact, going by the latest report from RealPage, occupancy rate in July reached 96.2%, suggesting impressive leasing activity in 2019’s peak season. This marks the highest rate since 2000. Additionally, rent growth this July was approximately 40 basis points higher, year over year, with apartment rents averaging $1,414 across the United States. Amid high-apartment supply environment that had earlier curtailed landlords’ ability to command more rents, a strong leasing season came as a breather for residential REITs, including MAA, Equity Residential EQR, AvalonBay Communities, Inc. AVB and Essex Property Trust, Inc. ESS. As for MAA, the company’s properties are well positioned to benefit from this industry trend.
Strategic efforts to strengthen portfolio: The company makes opportunistic investments to maintain the right product mix and raise the number of apartment communities in the dynamic markets. In fact, as part of its portfolio-recycling efforts, MAA expects 2019 disposition of $125-$175 million and multi-family acquisitions of $50-$100 million. Additionally, the company is aimed at upgrading interiors of its housing units, through a redevelopment program. This enables it to generate higher average rental rates as compared with non-renovated units.
Strong leverage: MAA’s debt/equity ratio stands at 0.72, compared with the industry average of 0.92, indicating a relatively lower debt burden than its peers. Furthermore, with improved investment-grade metrics and limited near-term maturities, the company has strengthened its balance-sheet position. Also, at the end of the June-end quarter, unencumbered net operating income (NOI) was 90.1% of total NOI. Hence, a decent balance-sheet position will enable it to leverage on the improving market fundamentals and pursue portfolio-enhancing moves.
Consistent dividend payer: Solid dividend payouts remain the biggest enticement for REIT investors, and MAA remains committed to boost shareholder wealth through dividend hikes.Specifically, the company’s common dividend registered overall growth of a whopping 217%, denoting an annualized 4.7% return since the initial common dividend payment. This May, it also announced its 102nd consecutive quarterly common stock dividend, maintaining the 4.1% dividend hike announced last December.
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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