In addition to a 10 percent dividend yield, Bluerock Residential Growth, a $230 million market cap REIT, has favorable figures in both cash flow generation and profitability growth. When compared to the same quarter of last year, the company’s 2015 Q3 total revenue grew by an impressive 21 percent, property net operating income (NOI) increased 25 percent, same store NOI improved by 8.7 percent, and adjusted funds from operations (AFFO) grew 238 percent. That being said, upon analyzing the Q3 data further Bluerock certainly has been pushing the boundaries.
Bluerock’s distributions have either failed to been covered or are poorly covered depending on the metrics used. The dividend of $0.29 is larger than AFFO per share of $0.22. The company has stated that if they had previously invested the raised proceeds, the AFFO per share would have been $0.32 (pro forma AFFO). In this case, the dividend would be covered, but by not much. The information we would like to convey here is that, in order to sustain the high dividend yield, Bluerock must continue to grow and avoid raising dividends.
Bluerock has also been aggressively diluting the shareholder base. For example, over the past twelve months the company has increased their number of common shares by nearly fourfold. Despite AFFO’s impressive growth, the share dilution has resulted in a 2015 Q3 AFFO per share equal to the prior year’s quarter. The bright side is that, if the company fulfills the entire growth potential (pro forma AFFO), the AFFO per share growth will be 45 percent. Not bad.
Bluerock enjoys a leverage ratio that is greater than most if its peers. The total debt to total enterprise figure has increased from 50 percent in Q2 to 56 percent in Q3. When compared to other Apartment REITs, with market capitalization between $200 and $400 million, 56 percent appears moderate since some peers are approaching 70 percent.
In conclusion, Bluerock’s growth does not seem very desperate when we analyze a step further into the numbers and look at it from other perspectives. The company is simply another small market cap REIT that is working hard to get their foot into the big leagues club’s door.
Source: Bluerock Residential Growth RE (AMEX:BRG), Fast Graphs
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