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Is it Prudent to Hold On to Mid-America Apartment (MAA) Now?

Zacks Equity Research
·4 min read

Mid-America Apartment Communities MAA, also known as MAA, has been witnessing high demand for its apartment communities in the Sunbelt area. However, high levels of supply and the recent uncertainties due to the coronavirus pandemic will hinder the company’s growth prospects.  

Growth of prime age groups for rentals and migration of population to the Southeast and Southwest regions of United States is likely to drive household formation and apartment rental demand in the company’s markets.

Therefore, this residential REIT is well poised to grow over the long term, with a well-balanced, diverse portfolio across the above-mentioned regions. Additionally, MAA is focusing on redevelopment initiatives and smart-home installations to generate accretive returns and boost earnings from its existing asset base.

Furthermore, the company enjoys a solid balance sheet with lower leverage and limited near-term debt maturities and funding obligations. The company also has considerable capacity from undrawn committed credit facilities. As of Dec 31, 2019, MAA held cash and cash equivalents of $20.4 million.

Also, the company has a decent track record of dividend payments with 104 consecutive quarterly common dividend payments. Last December, the company announced common stock cash dividend of $1 per share. This marked a 4.2% sequential hike and the 10th consecutive annual increase in the company’s dividend.

However, the coronavirus pandemic has forced the company to withdraw its 2020 guidance. The virus outbreak and efforts to contain its spread are expected to hurt the economy and the residential real estate industry. The company will provide further updates during its first-quarter earnings conference call on Apr 29.

Nevertheless, per management, the first-quarter results are aligned with the previously-announced guidance, according to which the quarterly core FFO per share was expected to be $1.53-$1.65. Until Mar 24, 2020, the company had same-store average physical occupancy of 95.7%. In addition, geographic concentration of assets in the Southeast and Southwest regions of the United States is another concern for MAA. Therefore, the company’s performance is susceptible to any adverse development in the general economic conditions of these regions.

Apart from this, stiff competition in the residential real estate market from various housing alternatives like manufactured housing, condominiums, and the new and existing home markets will likely dampen MAA’s performance. This is restricting the company’s power to raise rent or increase occupancy and might lead to aggressive pricing for acquisitions.

Shares of this Zacks Rank #3 (Hold) company have declined 13.7% compared with the industry's fall of 27.7% over the past 12 months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Bluerock Residential Growth REIT, Inc. BRG has growth estimate of 2.44% of the Funds From Operations per share for the current year. The stock currently sports a Zacks Rank of 1.

Piedmont Office Realty Trust, Inc.’s PDM FFO per share estimate for the ongoing year has been revised 3.2% upward to $1.96 over the past two months. The stock currently carries a Zacks Rank of 2 (Buy).

Plymouth Industrial REIT’s PLYM Zacks Consensus Estimate for 2020 FFO per share moved up 1.5% to $2.08 over the past month. The stock currently holds a Zacks Rank of 2.

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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