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

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Zacks Equity Research
·4 min read
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Mid-America Apartment Communities’ MAA, also known as MAA, diversified Sunbelt portfolio of suburban-focused communities has been less affected by the pandemic and the economic shutdown.

The pandemic has, in fact, accelerated employment shifts and population inflow into the company’s markets, as renters seek more business-friendly, lower taxed and low-density cities. These favorable longer-term secular dynamic trends are increasing desirability of its markets. Amid this, MAA is well poised to capture recovery in demand and leasing as compared to the expensive coastal markets.

MAA is also focused on redevelopment initiatives and smart-home installations to generate accretive returns and boost earnings from its existing asset base. In fact, such repositioning efforts are likely to stoke additional value and rent growth, delivering higher yield benefits beginning 2021.

MAA enjoys a solid balance sheet, with low leverage and ample availability under its revolving credit facility, which makes it well poised to sail through the pandemic-related challenges. As of Sep 30, 2020, the company held cash and cash equivalents of $18.4 million as well as $980 million of available capacity under its unsecured revolving credit facility, net of commercial paper borrowings. Further, it generates 93.2% unencumbered net operating income (NOI), providing scope for tapping additional secured debt capital if required.

Moreover, solid dividend payouts are the biggest enticement for REIT shareholders and MAA is committed to that. Last December, the company announced a common stock cash dividend of $1.025 per share. This marks a 2.5% sequential hike and the 11th consecutive annual increase in the company’s dividend.

Also, the Zacks Consensus Estimate for funds from operations (FFO) moved marginally upward for 2020 and 2021, respectively, over the past month. Shares of this Zacks Rank #3 (Hold) company have gained 7% as against the industry's decline of 3.9% over the past six months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


 

However, adverse impact of the coronavirus pandemic on the economy and job market might depress demand and hurt rent-paying capabilities of tenants, leading to rental abatements and pricing-power moderation.

In addition, new supply of residential properties has been elevated for the past few years and is expected to continue to be at high levels in the next few quarters. This high supply affects landlords’ capability to demand more rents and results in lesser absorption, particularly, at apartment communities located in urban submarkets. This is likely to strain rental rates and impede revenue growth in the near term.

Stocks to Consider

CubeSmart’s CUBE Zacks Consensus Estimate for 2021 funds from operations (FFO) per share has moved up marginally to $1.78 in the past week. The company currently carries a Zacks Rank of 2 (Buy).

Extra Space Storage Inc.’s EXR FFO per share estimate for the current year has been revised marginally upward to $5.43 in the past week. The company carries a Zacks Rank of 2, currently.

City Office REIT, Inc.’s CIO Zacks Consensus Estimate for the ongoing-year FFO per share has been unchanged at $1.32 in a month’s time. The company holds a Zacks Rank of 2 at present.

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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MidAmerica Apartment Communities, Inc. (MAA) : Free Stock Analysis Report
 
Extra Space Storage Inc (EXR) : Free Stock Analysis Report
 
CubeSmart (CUBE) : Free Stock Analysis Report
 
City Office REIT, Inc. (CIO) : Free Stock Analysis Report
 
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