Is it Wise to Retain UDR Stock in Your Portfolio for Now?

UDR Inc. UDR is well-poised to benefit from its diversified residential portfolio supported by healthy demand amid favorable demographics. Efforts to leverage technological moves to enhance operational efficiency augur well. Its focus on disciplined capital distribution and a strong balance sheet position is encouraging.However, the elevated supply of residential rental units in some of its markets may affect the rent growth momentum. High interest expenses add to its concerns.Last month, UDR reported first-quarter 2025 funds from operations as adjusted (FFOA) per share of 61 cents, which was in line with the Zacks Consensus Estimate. The figure remained unchanged year over year. Results reflected year-over-year growth in same-store net operating income (NOI), led by higher occupancy and an effective blended lease rate. However, a rise in other operating expenses and general and administrative expenses undermined the performance to an extent.What is Aiding UDR?UDR has a geographically diverse portfolio with a superior product mix of A/B quality properties, including 31% urban and 69% suburban communities in coastal and Sunbelt locations, respectively. This diversification limits volatility and concentration risks while aiding the company in generating steady operating cash flows. We expect UDR’s rental income to increase 2% in 2025.In UDR’s markets, the rise in homeownership costs relative to rents in a high-interest rate environment has made the transition from renter to homeowner difficult. Moreover, demographic growth in its markets continues to be encouraging in the young adult age cohort, which has a higher propensity to rent. These factors position the company well for growth.UDR is leveraging technological initiatives and process enhancements to bring operational resiliency across its platform, aiding in enhanced customer experience. Such efforts are likely to give it a competitive edge over others and enable it to capture additional net NOI, driving long-term profitability. We estimate the same-property NOI to increase 2% and 4.6% in 2025 and 2026, respectively.UDR continues to focus on disciplined capital distribution and maintaining a healthy balance sheet position. As of March 31, 2025, UDR had around $1.1 billion of liquidity. Also, 87.1% of its NOI is unencumbered. Investment-grade credit ratings of Baa1(Stable) and BBB+(Stable) from Moody's Investors Service and S&P Global Ratings, respectively, enable it to procure debt financing at an attractive cost.Solid dividend payouts are arguably the biggest enticement for REIT investors, and the company remains committed to that. UDR has increased its dividend five times in the last five years. The five-year annualized dividend growth rate is 4.72%, which is encouraging. Given UDR’s solid financial position, its dividend seems sustainable and well-covered by cash flow from operations. Such efforts boost investors’ confidence in the stock.What is Hurting UDR?Although the pace of new supply is expected to slow down given the decline in new starts, the struggle to lure renters still persists as the volume of new deliveries remains elevated in some markets where the company operates. Particularly, the Sunbelt markets, which constitute nearly 25% of UDR’s NOI, continue to lag behind the coastal markets owing to the elevated levels of new supply.Despite the Federal Reserve announcing rate cuts late in 2024, the interest rate is still high and a concern for UDR. Elevated rates imply high borrowing costs for the company, affecting 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 $5.81 billion.Shares of this REIT, carrying a Zacks Rank #3 (Hold), have lost 11.7% over the past three months compared with the industry’s decline of 10%. Analysts seem bearish on this stock, with the Zacks Consensus Estimate for its 2025 FFO per share being lowered marginally over the past two months to $2.50. Image Source: Zacks Investment ResearchStocks to ConsiderSome better-ranked stocks from the broader REIT sector are VICI Properties VICI and W.P. Carey WPC, 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 VICI Properties’ 2025 FFO per share has been raised marginally over the past month to $2.34.The consensus estimate for W.P. Carey’s current-year FFO per share has moved northward by 1% in the past month to $4.88.Note: Anything related to earnings presented in this write-up represents 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 United Dominion Realty Trust, Inc. (UDR): Free Stock Analysis Report W.P. Carey Inc. (WPC): Free Stock Analysis Report VICI Properties Inc. (VICI): 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