Investing In Residential Real Estate Properties vs. REITs (Part 2/2)


Click here if you haven’t read Part 1

Purchasing REIT stocks is a much less hands-on approach to real estate investment. Once the investor has decided which REIT stocks to buy, all that is required is to track the stock value, get paid regular dividends and decide when to sell. There is no financial responsibility once the initial purchase has been completed, unless the investor decides to buy additional shares. Liquidation is easy: You just pick up the phone or enter the necessary information on your PC, tablet or smartphone.

Among residential REITs, our due diligence has spotted certain highly-ranked stocks with regard to dividend-generation potential. Essex Property Trust (NYSE:ESS), which invests in apartment communities on the West Coast, has greatly exceeded our expectations. It has no sole leading indicator that outperforms its peers; however, all distributing-boost components stand out as above average. The downside is its heavy price-to-FFO — around 24× vs. the sector median of 19×.


Note: As of 23 October of 2015

Mid-America Apartments (NYSE:MAA), currently trading at 16×, is a cheaper choice, with a dividend-generation potential somewhat above the sector median — not little for one of the best-performing REIT space sectors at the moment. Additionally, dividend yield is at par with peers’, unlike Essex’s, which has the lowest. Also unlike Essex, Mid-America invests in Southeastern and Southwestern markets — about ⅔ in large markets, the rest in secondary ones.

Mid-America released strong Q3 results on October 28. The highlight has been its 2015 FFO guidance, which, compared with 2014 FFO, increased from 7 to 9 percent.

NexPoint Residential Trust (NYSE:NXRT) and Post Properties (NYSE:PPS) are also highly-ranked and will be subject to analysis in coming posts.

Source: Fast Graphs, Essex Property Trust, Mid-America Apartments

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.

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