SUI: Basking In The Sun

same site metricsSun Communities (NYSE: SUI) comprises part of a fascinating subset of the residential REIT sector — manufactured residences — characterized by lower turnover, capex (as of revenues) and rent per square foot, and higher average tenure and square footage. Its price-to-FFO ratio of around 18× has been higher than its historic norm, but Sun Communities has still enjoyed a dividend yield higher than its sector’s median — 4.2 percent. Its track record can perhaps explain this strength.

The management team has described Sun Communities as a “recession-resistant” company, and I can see that clearly. Looking back, the dividend rate has not decreased even during the Great Recession. Between 2006 and 2013, they paid covered dividends at $2.52 per annum, with dividend per share growth resuming in 2014. An impaired leasing environment caused FFOs to decline between 2003 and 2005, but they have increased since then. Since 2008, share price has increased seven fold and currently trades around $63.

capexSUI’s first-quarter performance of 2015 vs. 2014 has been on a par with its history. Total portfolio occupancy, same-site revenues and same-site NOI increased from 90.2 to 92.9; 6.8; and 8.6 percent, respectively. There has also been improvement in same-site occupancy and same-site weighted average monthly rent.

locationsThe company’s performance has been strengthened by its second segment — RV resorts — whose participation in revenues should increase from ten percent in 2011 to eighteen percent in 2015. RV industry fundamentals are favorable as unit shipments peaked in 2014 and disposable incomes have risen. Since some sites are hybrid, the manufactured residence and RV segments complement each other nicely.

debt profileTo sum up: Although I am concerned about current share prices, there are attractive reasons for a long-term purchase of SUI stocks —

  • good dividend yield
  • segment diversification
  • rapid growth
  • a conservative balance sheet

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Source: Sun Communities, Fast Graphs


Written by Heli Brecailo

Disclaimer: This newsletter is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Please do your own due diligence before making any investment decision. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.

Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.​