Is Mid-America's (MAA) Latest Dividend Hike Sustainable?
Mid-America Apartment Communities’ MAA, also known as MAA, board of directors approved an increase in the company’s quarterly dividend payment. The company will now pay out $1.47 per share, reflecting a hike of 5% from the prior dividend of $1.40.
Based on the increased rate, the annual dividend comes to $5.88 per share, marking an increase of 28 cents from the prior dividend. At this new rate, the annualized yield comes at 4.61%, based on the stock’s closing price of $127.63 on Dec 12. The new dividend will be paid out on Jan 31 to shareholders of record as of Jan 12, 2024.
Solid dividend payouts are arguably the biggest enticements for REIT shareholders, and MAA remains committed to the same. The company has a good record of paying out dividends to its shareholders. The recent hike reflects MAA’s ability to generate solid income through its operating platform and high-quality portfolio. It also marks the 14th consecutive year MAA has hiked its dividend. In the last five years, MAA increased its dividend six times and its five-year annualized dividend growth rate is 8.74%. Check Mid-America Apartment’s dividend history here.
MAA’s well-diversified Sun Belt-focused portfolio is poised to benefit from the healthy renter demand in its markets. The favorable in-migration trends of jobs and households in these submarkets, and high home ownership costs continue to aid demand. MAA’s technological initiatives and encouraging redevelopment projects are expected to fuel margin expansion, boding well for long-term growth. We project an average physical occupancy of 95.6% for 2023.
MAA enjoys a solid balance sheet, with low leverage and ample availability under its revolving credit facility. As of Sep 30, 2023, the company had a strong balance sheet, with $1.4 billion in combined cash and capacity available under its unsecured revolving credit facility, and a historically low net debt/adjusted EBITDAre ratio of 3.4. In the third quarter of 2023, it generated 95.8% unencumbered NOI, providing the scope for tapping additional secured debt capital if required. Hence, the company is well-positioned to bank on growth scopes.
Moreover, this REIT’s trailing 12-month return on equity (ROE) highlights its growth potential. The company’s ROE of 9.30% compares favorably with the industry’s 5.07%, reflecting that MAA is more efficient in using shareholders’ funds than its peers.
Backed by healthy operating fundamentals, we expect the company’s core FFO to increase 8.5% year over year in the current year. Moreover, given its balance sheet strength and prudent financial management, the company is well-poised to capitalize on growth opportunities and reward shareholders handsomely. Looking at its lower dividend payout (than its industry), its dividend distribution is expected to be sustainable.
However, shares of the Zacks Rank #3 (Hold) company have gained 2.8% over the past month, slightly underperforming the industry’s growth of 3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Recent Dividend Increases
On Dec 8, Invitation Homes Inc. INVH announced a 7.7% increase in its dividend. INVH will now pay a quarterly cash dividend of 28 cents per share, up from 26 cents paid out earlier. The raised dividend is scheduled to be paid out on Jan 19, 2024, to shareholders of record as of Dec 27, 2023. Check Invitation Homes dividend history here.
On Dec 4, Alexandria Real Estate Equities, Inc. ARE announced a 2.4% sequential hike in its fourth-quarter 2023 cash dividend payout. Delighting its shareholders, the company will now pay out a dividend of $1.27 per share, up from the $1.24 paid out in the prior quarter. The increased dividend will be paid out on Jan 12, 2024, to shareholders of record as of Dec 29, 2023. Check Alexandria’s dividend history here.
On Dec 7, CubeSmart CUBE announced a 4.1% increase in its quarterly dividend to 51 cents per share. CubeSmart will pay out the increased dividend on Jan 16 to common shareholders of record as of Jan 2, 2024. Check CubeSmart’s dividend history here.
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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Mid-America Apartment Communities, Inc. (MAA) : Free Stock Analysis Report
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