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Is Mid-America's (MAA) Latest Dividend Hike Sustainable?

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·4 min read
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Mid-America Apartment Communities’ MAA, also known as MAA, board of directors recently approved an increase in the company’s quarterly dividend payment. The company will now pay $1.0875 per share, which reflects a hike of 6.1% from the prior dividend of $1.025.

Based on the increased rate, the annual dividend comes to $4.35 per share. The new dividend will be paid out on Jan 31 to shareholders of record as of Jan 14, 2022. At this new rate, the annualized yield comes at 2.01% based on the stock’s closing price of $216.05 on Dec 9.

Following the dividend-hike announcement, shares of MAA were up 1.46% during Wednesday’s trading session. However, MAA stock declined nearly 1% on Thursday due to broader market concerns.

Solid dividend payouts are arguably the biggest enticements for REIT shareholders and MAA remains committed to that. The company has a good track record of paying dividends to its shareholders and the recent hike marks the 12th consecutive annual dividend increase. This reflects MAA’s ability to generate solid income through its operating platform and a high-quality portfolio.

In addition, with the expected 2021 funds from operations (FFO) per share growth of 8.55% ahead of the industry’s average of 5.6%, the increased dividend is likely to be sustainable.

MAA maintains a well-balanced, diverse portfolio across the Southeast and Southwest regions of the United States. The portfolio is diversified in terms of markets, submarkets, product types and price points. This diversification shields the company from an economic downturn in any particular market, choppiness in any product type or assets belonging to specific price points and helps to generate a consistent revenue stream.

MAA’s diversified Sunbelt portfolio of the suburban-focused communities was less severely affected by the pandemic and the economic shutdown. The pandemic accelerated employment shifts and population inflow into the company’s markets as renters sought more business-friendly, lower-taxed and low-density cities. These favorable longer-term secular dynamic trends are increasing the desirability of its markets. Amid this, MAA is poised to capture recovery in demand and leasing compared to the expensive coastal markets. Moreover, a high-quality resident profile has resulted in a solid collection performance during the pandemic.

MAA enjoys a solid balance sheet, with low leverage and ample availability under its revolving credit facility. As of Sep 30, 2021, $1 billion of combined cash and capacity was available under its unsecured revolving credit facility, net of commercial paper borrowings. It generated 95.1% unencumbered net operating income in the third quarter of 2021, providing scope for tapping additional secured debt capital if required. Hence, with manageable near-term maturities and funding obligations, the company is well-positioned to bank on opportunities.

Over the past three months, shares of this Zacks #2 (Buy) MAA have gained 13.7%, outperforming the industry’s rally of 7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Zacks Investment Research

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Other Key Picks

Some other top-ranked stocks from the residential REIT sector include AvalonBay Communities, Inc. AVB, Camden Property Trust CPT and American Homes 4 Rent AMH.

AvalonBay Communities holds a Zacks Rank of 2 at present. AvalonBay Communities’ long-term growth rate is projected at 4.2%.

The Zacks Consensus Estimate for AVB’s 2021 FFO per share has been revised marginally upward in a week.

The Zacks Consensus Estimate for Camden Property Trust’s ongoing-year FFO per share has moved 1% north to $5.36 over the past month.

The Zacks Consensus Estimate for Camden Property Trust’s 2021 FFO per share suggests an increase of 9.4% year over year. Currently, CPT carries a Zacks Rank of 2.

American Homes 4 Rent holds a Zacks Rank of 2 at present. The long-term growth rate for American Homes 4 Rent is projected at 10.3%.

The Zacks Consensus Estimate for AMH’s 2021 FFO per share has been revised marginally upward in a month to $1.36.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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AvalonBay Communities, Inc. (AVB) : Free Stock Analysis Report

MidAmerica Apartment Communities, Inc. (MAA) : Free Stock Analysis Report

Camden Property Trust (CPT) : Free Stock Analysis Report

American Homes 4 Rent (AMH) : Free Stock Analysis Report

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