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By Bob Ciura, BarChart.com
Apartment REITs stand to benefit from declining interest rates. And apartment REITs have proved resilient to recessions thanks to the essential nature of their business. As a result, they are interesting candidates for the portfolios of income investors.
The following 3 apartment REITs have quality property portfolios and long-term growth potential. They also pay dividends above the S&P 500 average.
The top apartment REITs have attractive valuations and high dividend yields. This article will discuss 3 of our top-ranked apartment REITs for income investors right now.
UMH Properties (UMH)
UMH Properties is a REIT that is one of the largest manufactured housing landlords in the U.S. It was founded in 1968 and currently owns tens of thousands of developed sites and 135 communities located across the midwestern and northeastern U.S.
As manufactured homes are cheaper than conventional homes, UMH Properties has proved resilient to recessions. This was evident in the severe recession caused by the coronavirus crisis in 2020, as the REIT grew its FFO per share by 11% in that year. UMH Properties has grown its FFO per share by 3.8% per year on average over the last decade.
UMH Properties, Inc. (UMH) posted Total Income of $57.7 million for the quarter ending March 31, 2024, marking a 10% increase from the same period in 2023, where Total Income stood at $52.6 million. However, the company reported a Net Loss Attributable to Common Shareholders of $6.3 million or $0.09 per diluted share for Q1 2024, compared to a Net Loss of $5.3 million or $0.09 per diluted share for Q1 2023.
Despite the net loss, Funds from Operations Attributable to Common Shareholders (FFO) showed significant improvement, reaching $14.0 million or $0.20 per diluted share for Q1 2024, compared to $10.6 million or $0.18 per diluted share for Q1 2023, representing an 11% per diluted share increase.
UMH Properties has managed to grow its net asset value (NAV) per share at an attractive rate in recent years and we expect it to be able to continue doing so for the foreseeable future. UMH Properties’ average occupancy rate is now reaching levels that will give management greater pricing power over tenants, thereby delivering better same property net operating income growth.
Given that management recently raised the dividend, and it remains sufficiently covered by FFO-per-share with significant growth on the way, we believe the dividend is safe for the foreseeable future and is in fact likely to see additional growth in the years to come. UMH stock currently yields 4.5%.
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American Homes 4 Rent (AMH)
American Homes 4 Rent is an internally-managed REIT which focuses on acquiring, developing, renovating, operating and leasing single-family homes as rental properties. The trust holds nearly 54,000 single-family properties in sub-markets of metropolitan statistical areas in 22 states.
On August 1st, 2024, AMH announced second quarter results for the period ending June 30th, 2024. For the quarter, revenue grew 7.1% to $423.5 million, which was $2.6 million better than expected. FFO of $0.45 compared favorably to FFO of $0.41 in the previous year and was $0.02 ahead of estimates.
For the quarter, AMH had a same-home average occupied day percentage of 96.6%, which was 40 basis point decrease from the prior year. New leases signed had rental rate growth of 5.7% while renewal rental rates increased 5.2%., leading to a blended growth rate of 5.3%. Rents and other single-family property revenues improved 7.1% while occupied homes of 58,860 compared to 58,615 in the first quarter of 2024. Average monthly rents per property was up 5.6% while property expenses increased 4.8% to $118.8 million.
AMH is one of the largest operators of single-family in the U.S., giving it a size and scale that is above most of its peer group. AMH has a short history as a publicly traded REIT, but funds-from-operation growth was extensive at the beginning of the trust’s existence.
AMH’s funds-from-operation grew at a rate of 11.3% per year for the 2014 to 2023 period, though this has slowed to 8.4% annually over the last five years. We continue to forecast annual growth of 5% for funds-from operation through 2029.
AMH is one of the largest operators of single-family in the U.S., giving it a size and scale that is above most of its peer group. With a 2024 dividend payout ratio of 59% (in terms of FFO) the dividend payout appears secure. AMH stock currently yields 2.7%.
Equity LifeStyle Properties (ELS)
Equity LifeStyle Properties owns and operates lifestyle-oriented properties consisting primarily of manufactured home and recreational vehicle communities. Equity LifeStyle Properties operates through the following segments: Property Operations; and Home Sales and Rentals Operations. The Property Operations segment owns and operates land lease properties. The Home Sales and Rentals Operations segment purchases, sells, and leases homes at the properties.
On July 22nd, 2024, Equity LifeStyle Properties reported second-quarter earnings for Fiscal Year (FY)2024. The company net income per common share for the quarter increased to $0.42, a 24.3% rise from $0.34 in 2023. Funds from Operations (FFO) per common share and OP unit grew to $0.69, up 13.5%, while Normalized FFO reached $0.66, a 2.9% increase.
For the six-month period, net income per common share rose by 29.4% to $1.01, and FFO per common share and OP unit increased by 16.6% to $1.55. Normalized FFO saw a 5.9% rise to $1.44.
Operational highlights include a 4.6% increase in core property operating revenues and a 5.5% rise in core income from property operations, excluding property management, for the quarter.
The manufactured housing (MH) segment reported a 6.2% increase in base rental income, primarily due to rate hikes and occupancy gains. Additionally, 255 new homes were sold at an average price of approximately $89,000.
Its competitive advantage is that Equity LifeStyle has a national presence and excellent reputation within the industry, which allows the Trust to pursue opportunities to increase customer service and deliver quality earnings for shareholders.
ELS has increased its dividend for 19 consecutive years and currently yields 2.7%.
On the date of publication, Bob Ciura did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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