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Here's Why You Should Retain UDR Stock in Your Portfolio Now
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UDR Inc. (UDR - Free Report) is well-poised to benefit from its superior diversified portfolio in the coastal and Sunbelt markets. The favorable demographic trends and higher interest rates are likely to aid the company. However, the elevated supply of residential rental units in some markets and high interest rates are concerns.
Last July, this residential real estate investment trust (REIT) reported its second-quarter 2024 funds from operations as adjusted (FFOA) per share of 62 cents, which surpassed the Zacks Consensus Estimate of 61 cents. Results reflected an increase in revenues from same-store communities. UDR also raised its full-year 2024 guidance.
Shares of UDR have risen 11.4% over the past month compared with the industry's upside of 8.4%.
Analysts also seem bullish on this Zacks Rank #3 (Hold) company, with the Zacks Consensus Estimate for its 2024 FFOA per share revised upward marginally over the past month to $2.46.
Image Source: Zacks Investment Research
What’s Aiding UDR?
UDR has a geographically diverse portfolio with a superior product mix of A/B quality properties throughout the United States, including both coastal and Sunbelt locations, with a mix of 40% urban and 60% suburban communities. This diversification limits volatility and concentration risks while aiding the company in generating steady operating cash flows. We estimate a year-over-year increase of 2.3% in rental income in 2024.
The rise in homeownership costs due to higher interest rates has resulted in renting apartment units as a more affordable option. The young-adult age cohort in UDR’s markets has a higher propensity to rent, given the locational advantage it offers. These factors are expected to drive the demand for apartment rental units in the upcoming period, poising the company well for growth.
UDR is leveraging technological initiatives and process enhancements to bring about operational resiliency across its platform. Such efforts are likely to give UDR a competitive edge over others and enable it to capture additional net operating income (NOI), driving long-term profitability. We estimate the same property NOI to increase by 1.3% for 2024.
UDR continues to focus on disciplined capital distribution to maintain a healthy balance sheet position.As of June 30, 2024, UDR had $946.2 million of liquidity, and total indebtedness was $5.8 billion. The net debt-to-EBITDAre was 5.7X in the second quarter. The company’s debt maturity schedule is well-laddered, with weighted average years to maturity of 5.2 years and a weighted average interest rate of 3.38%. Also, 86.4% of its NOI is unencumbered, enabling 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. The company has increased its dividend five times in the last five years, and the five-year annualized dividend growth rate is 4.79%, which is encouraging. Given UDR’s solid financial position, the latest dividend hike seems sustainable and well covered by cash flow from operations. Such efforts boost investors’ confidence in the stock.
What’s Hurting UDR?
With the ongoing construction standing at a high level, a sizeable number of apartment deliveries are expected in the upcoming period. Also, UDR faces competition from other housing alternatives such as rental apartments, condominiums and single-family homes. Such a competitive landscape limits the company’s ability to increase the rent, restricting its growth momentum to a certain extent.
A high interest rate environment is 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, an
Stocks to Consider
d its total debt as of June 30, 2024 was $5.8 billion. We estimate interest expenses to increase by 6.4% for 2024. Moreover, with high interest rates still in place, the dividend payout might seem less attractive than the yields on fixed-income and money market accounts.
The Zacks Consensus Estimate for Cousins Properties’ current-year FFO per share has been raised marginally over the past two months to $2.66.
The Zacks Consensus Estimate for Essex Property Trust’s current-year FFO per share has moved northward marginally over the past week to $15.53.
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.
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Here's Why You Should Retain UDR Stock in Your Portfolio Now
UDR Inc. (UDR - Free Report) is well-poised to benefit from its superior diversified portfolio in the coastal and Sunbelt markets. The favorable demographic trends and higher interest rates are likely to aid the company. However, the elevated supply of residential rental units in some markets and high interest rates are concerns.
Last July, this residential real estate investment trust (REIT) reported its second-quarter 2024 funds from operations as adjusted (FFOA) per share of 62 cents, which surpassed the Zacks Consensus Estimate of 61 cents. Results reflected an increase in revenues from same-store communities. UDR also raised its full-year 2024 guidance.
Shares of UDR have risen 11.4% over the past month compared with the industry's upside of 8.4%.
Analysts also seem bullish on this Zacks Rank #3 (Hold) company, with the Zacks Consensus Estimate for its 2024 FFOA per share revised upward marginally over the past month to $2.46.
Image Source: Zacks Investment Research
What’s Aiding UDR?
UDR has a geographically diverse portfolio with a superior product mix of A/B quality properties throughout the United States, including both coastal and Sunbelt locations, with a mix of 40% urban and 60% suburban communities. This diversification limits volatility and concentration risks while aiding the company in generating steady operating cash flows. We estimate a year-over-year increase of 2.3% in rental income in 2024.
The rise in homeownership costs due to higher interest rates has resulted in renting apartment units as a more affordable option. The young-adult age cohort in UDR’s markets has a higher propensity to rent, given the locational advantage it offers. These factors are expected to drive the demand for apartment rental units in the upcoming period, poising the company well for growth.
UDR is leveraging technological initiatives and process enhancements to bring about operational resiliency across its platform. Such efforts are likely to give UDR a competitive edge over others and enable it to capture additional net operating income (NOI), driving long-term profitability. We estimate the same property NOI to increase by 1.3% for 2024.
UDR continues to focus on disciplined capital distribution to maintain a healthy balance sheet position.As of June 30, 2024, UDR had $946.2 million of liquidity, and total indebtedness was $5.8 billion. The net debt-to-EBITDAre was 5.7X in the second quarter. The company’s debt maturity schedule is well-laddered, with weighted average years to maturity of 5.2 years and a weighted average interest rate of 3.38%. Also, 86.4% of its NOI is unencumbered, enabling 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. The company has increased its dividend five times in the last five years, and the five-year annualized dividend growth rate is 4.79%, which is encouraging. Given UDR’s solid financial position, the latest dividend hike seems sustainable and well covered by cash flow from operations. Such efforts boost investors’ confidence in the stock.
What’s Hurting UDR?
With the ongoing construction standing at a high level, a sizeable number of apartment deliveries are expected in the upcoming period. Also, UDR faces competition from other housing alternatives such as rental apartments, condominiums and single-family homes. Such a competitive landscape limits the company’s ability to increase the rent, restricting its growth momentum to a certain extent.
A high interest rate environment is 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, an
Stocks to Consider
d its total debt as of June 30, 2024 was $5.8 billion. We estimate interest expenses to increase by 6.4% for 2024. Moreover, with high interest rates still in place, the dividend payout might seem less attractive than the yields on fixed-income and money market accounts.
Some better-ranked stocks from the broader REIT sector are Cousins Properties (CUZ - Free Report) and Essex Property Trust, Inc. (ESS - Free Report) , 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 Cousins Properties’ current-year FFO per share has been raised marginally over the past two months to $2.66.
The Zacks Consensus Estimate for Essex Property Trust’s current-year FFO per share has moved northward marginally over the past week to $15.53.
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.