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UDR Stock Rallies 26.4% in Six Months: Will the Trend Continue?
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Shares of UDR Inc. (UDR - Free Report) have rallied 26.4% in the past six months, outperforming its industry's growth of 21.8%.
This residential REIT is well-poised to benefit from its diversified portfolio with a superior product mix of A/B quality properties in the coastal and Sunbelt markets. Healthy demand for rental units in its markets amid favorable demographic trends is likely to benefit the company in the upcoming quarters. Efforts to leverage technological moves to drive margin expansion also augur well. Its focus on a healthy balance sheet position and disciplined capital distribution is encouraging.
Analysts also seem bullish on this Zacks Rank #3 (Hold) company, with the Zacks Consensus Estimate for its 2024 FFO per share revised upward marginally over the past two months to $2.47.
Image Source: Zacks Investment Research
Factors Behind UDR Stock Price Surge: Will the Trend Last?
UDR has a geographically diversified portfolio with a superior product mix of A/B quality properties throughout the United States in coastal and Sunbelt locations, with a mix of 31% urban and 69% suburban communities. This portfolio diversification saves the company from concentration and volatility risks, providing steady rental cash flows.
In UDR’s market, the demographic trend is dominated by the young adult age cohort, who prefer renting over ownership, given the flexibility and locational advantage it offers. As per the company’s September Investor Presentation, renting apartments is 60% less expensive than owning homes, making it relatively much more affordable. 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. As per the company’s September Investor Presentation, the company’s innovation initiatives have led to an average of $30 million incremental NOI since 2018 and a 200 basis point controllable margin advantage when compared to peers.
The company focuses on maintaining an investment-grade balance sheet and ample liquidity to support operational efficiency and dividend growth. As of June 30, 2024, UDR had $946.2 million of liquidity. The company’s total indebtedness as of June 30, 2024 was $5.8 billion, with only $290.3 million maturing through 2025. At the end of the second quarter of 2024, the net debt-to-EBITDAre was 5.7X. The company’s debt maturity schedule is well-laddered. Also, 86.4% of its NOI is unencumbered, providing scope for tapping the additional secured debt capital if required.
Solid dividend payouts are arguably the biggest enticements 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.
Key Risks for UDR
The elevated supply of rental units in some of UDR’s markets and competition from alternative housing options are likely to weigh on its pricing power. Still high interest rates add to the company’s woes.
The Zacks Consensus Estimate for Essex Property Trust’s 2024 FFO per share is pegged at $15.55, up 3.46% year over year.
The Zacks Consensus Estimate for Centerspace’s 2024 FFO per share is pegged at $4.83, up 1.05% year over year.
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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UDR Stock Rallies 26.4% in Six Months: Will the Trend Continue?
Shares of UDR Inc. (UDR - Free Report) have rallied 26.4% in the past six months, outperforming its industry's growth of 21.8%.
This residential REIT is well-poised to benefit from its diversified portfolio with a superior product mix of A/B quality properties in the coastal and Sunbelt markets. Healthy demand for rental units in its markets amid favorable demographic trends is likely to benefit the company in the upcoming quarters. Efforts to leverage technological moves to drive margin expansion also augur well. Its focus on a healthy balance sheet position and disciplined capital distribution is encouraging.
Analysts also seem bullish on this Zacks Rank #3 (Hold) company, with the Zacks Consensus Estimate for its 2024 FFO per share revised upward marginally over the past two months to $2.47.
Image Source: Zacks Investment Research
Factors Behind UDR Stock Price Surge: Will the Trend Last?
UDR has a geographically diversified portfolio with a superior product mix of A/B quality properties throughout the United States in coastal and Sunbelt locations, with a mix of 31% urban and 69% suburban communities. This portfolio diversification saves the company from concentration and volatility risks, providing steady rental cash flows.
In UDR’s market, the demographic trend is dominated by the young adult age cohort, who prefer renting over ownership, given the flexibility and locational advantage it offers. As per the company’s September Investor Presentation, renting apartments is 60% less expensive than owning homes, making it relatively much more affordable. 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. As per the company’s September Investor Presentation, the company’s innovation initiatives have led to an average of $30 million incremental NOI since 2018 and a 200 basis point controllable margin advantage when compared to peers.
The company focuses on maintaining an investment-grade balance sheet and ample liquidity to support operational efficiency and dividend growth. As of June 30, 2024, UDR had $946.2 million of liquidity. The company’s total indebtedness as of June 30, 2024 was $5.8 billion, with only $290.3 million maturing through 2025. At the end of the second quarter of 2024, the net debt-to-EBITDAre was 5.7X. The company’s debt maturity schedule is well-laddered. Also, 86.4% of its NOI is unencumbered, providing scope for tapping the additional secured debt capital if required.
Solid dividend payouts are arguably the biggest enticements 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.
Key Risks for UDR
The elevated supply of rental units in some of UDR’s markets and competition from alternative housing options are likely to weigh on its pricing power. Still high interest rates add to the company’s woes.
Stocks to Consider
Some better-ranked stocks from the residentail REIT sector are Essex Property Trust (ESS - Free Report) and Centerspace (CSR - 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 Essex Property Trust’s 2024 FFO per share is pegged at $15.55, up 3.46% year over year.
The Zacks Consensus Estimate for Centerspace’s 2024 FFO per share is pegged at $4.83, up 1.05% year over year.
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.