Real Estate Investment Trusts, or REITs, are widely appealing for income investors due to their high dividend yields.There are many different industries within REITs. For example, there are REITs that own retail properties, and others that own healthcare properties.Apartment REITs are attractive options because they may be more recession-resistant than other types of REITs, as people will always need places to live, even during an economic downturn.This article will discuss 3 of our top-ranked apartment REITs for income investors right now.
Mid-America Apartment Communities (MAA)
Mid-America Apartment Communities (MAA) owns apartment communities in the Southeast, Southwest and mid-Atlantic regions of the U.S. Founded in 1977, it currently has ownership interest in 103,614 apartment units across 16 states and the District of Columbia and has a market capitalization of $18 billion.MAA aims to offer superior returns to its shareholders by focusing on the Sunbelt Region of the U.S., which has exhibited superior population growth and economic growth in the long run.In late July, MAA reported (7/31/24) financial results for the second quarter of fiscal 2024. Same-store net operating income edged up 0.7% over the prior year’s quarter, primarily thanks to growth in average rent per unit. Core funds from operations (FFO) per share dipped -3%, from $2.28 to $2.22, due to higher interest expense, but beat the analysts’ consensus by $0.02.MAA has missed the analysts’ FFO estimates only once in the last 25 quarters. MAA has decelerated in the last four quarters due to high supply of new apartments in its markets but the volume of new apartments has begun to lose steam, with fewer new apartments expected next year.MAA has benefited from its focus on the Sunbelt Region of the U.S., which has enjoyed higher economic growth than the rest of the country. About 60% of all the domestic moves occurred in the markets of MAA in the last nine years. MAA has grown its FFO per share at a 6.4% average annual rate over the last decade.MAA has increased its dividend for 13 consecutive years.
Equity Residential (EQR)
Equity Residential is one of the largest U.S. publicly-traded owners and operators of high-quality rental apartment properties with a portfolio primarily located in urban and dense suburban communities. The properties of the trust are located in affluent areas around Boston, New York, Washington, D.C., Southern California, San Francisco, Seattle, and Denver.Equity Residential greatly benefits from the favorable characteristics of its target group. Affluent renters are highly educated, well employed and earn high incomes. As a result, they pay approximately 20% of their incomes on rent and hence they are not burdened by their rent. Thanks to their strong earnings potential, the REIT can easily grow its rent rates year after year.Equity residential properties are located in some of America’s most affluent markets, which results in relatively robust rental collections due to the high quality of the trust’s tenants. Additionally, these locations have consistently seen increasing pricing trends. We forecast FFO/share CAGR of 5.2% in the medium-term, following the strong rebound in residential occupancy and overall pricing.The business is quite defensive against recessions given that residential real estate is an essential service and moving from one residence to another is generally viewed as highly inconvenient. As a result, tenants tend to prioritize paying their rent over non-essential spending during an economic downturn.Moreover, EQR’s balance sheet is quite strong, and its payout ratio is quite conservative at current levels. As a result, its dividend should be sustainable through an economic downturn and the REIT will likely be able to continue growing its dividend for the foreseeable future.
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%.More By This Author:3 Ultra-High Dividend Stocks Yielding Over 7%
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