Is it Wise to Retain Mid-America Stock in Your Portfolio Now?

Mid-America Apartment MAA is poised to gain from a well-diversified, Sun Belt-focused portfolio. The company's redevelopment initiatives and advancements in technology are poised to drive margin improvements, while its solid balance sheet provides a strong foundation for growth opportunities.However, increased rental unit supply in certain markets may heighten competition, limiting MAA’s ability to raise rents and tempering its growth momentum. Elevated interest expenses also remain a headwind.What’s Aiding MAA?MAA’s portfolio is well-positioned to benefit from healthy operating fundamentals in the Sunbelt region. The pandemic spurred employment growth and population migration to the company’s markets, as renters favored business-friendly, low-tax and less densely populated cities. The elevated cost of single-family homeownership, compounded by persistently high interest rates, continues to fuel demand for rental apartments. Against this backdrop, MAA is expected to sustain high occupancy levels in the near term.MAA remains focused on its three internal investment initiatives: interior redevelopments, property repositioning projects and Smart Home installations. In the first quarter of 2025, MAA redeveloped 1,102 apartment homes. As of March 31, 2025, the company has completed the installation of Smart Home technology in more than 96,000 units across its apartment community portfolio since the initiative’s beginning in the first quarter of 2019. In the first quarter of 2025, MAA spent $6.7 million on its redevelopment program, $4.1 million on its WiFi Retrofit program and $3.2 million on its repositioning program, which the company expects to produce solid returns and continue to enhance the quality of the portfolio. MAA enjoys a solid balance sheet, with low leverage and ample availability under its revolving credit facility. As of March 31, 2025, MAA had $1.0 billion of combined cash and available capacity under its unsecured revolving credit facility. It also has a low net debt/adjusted EBITDAre ratio of 4. Its outstanding debt has an average maturity of seven years at an effective rate of 3.8% as of March 31, 2025. In the first quarter of 2025, it generated 95.8% unencumbered NOI, providing the scope for tapping additional secured debt capital if required. Solid dividend payouts are arguably the biggest enticements for REIT shareholders, and MAA remains committed to that. In the past five years, MAA has increased its dividend seven times, and its five-year annualized dividend growth rate is 11.12%. Moreover, it has a lower dividend payout compared with the industry. Backed by healthy operating fundamentals, we expect its dividend distribution to be sustainable in the upcoming period.What’s Hurting MAA?Although the market is witnessing early signs of recovery with better lease-over-lease rates on renewals, management expects supply pressures to ease only toward the end of 2025 and into 2026. Under the given circumstances, the struggle to lure renters will persist in the near term, as supply volumes are expected to remain elevated in some Sunbelt markets like Austin, TX, Phoenix, AZ, and Nashville, TN. This is expected to put pressure on rent growth in the upcoming period. Despite the Federal Reserve announcing rate cuts late in 2024, the interest rate is still high and is a concern for MAA. Elevated rates imply a high borrowing cost for the company, which is likely to affect its ability to purchase or develop real estate. The company has a substantial debt burden, and its total debt, as of March 31, 2025, was $5 billion. Interest expenses for the first quarter of 2025 jumped 11.9% year over year to $45.2 million.Shares of this Zacks Rank #3 (Hold) company have risen 4.6% so far in the year against the industry’s decline of 2.2%. However, the estimate revision trend for 2025 FFO per share does not indicate an upbeat outlook for this company, with estimates moving marginally southward over the past month to $8.79. Given the downward estimate revision, the stock seems to have limited upside potential in the near term.Image Source: Zacks Investment ResearchStocks to ConsiderSome better-ranked stocks from the broader REIT sector are Welltower WELL and UMH Properties, Inc. UMH, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.The Zacks Consensus Estimate for Welltower’s 2025 FFO per share has moved up a cent in the past week to $4.99.The Zacks Consensus Estimate for UMH Properties’ 2025 FFO per share has moved north three cents in the past two months to $1.00.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.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Mid-America Apartment Communities, Inc. (MAA): Free Stock Analysis Report UMH Properties, Inc. (UMH): Free Stock Analysis Report Welltower Inc. (WELL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks