What happened
The past year was great for shareholders of UMH Properties (UMH 1.11%), an owner and operator of manufactured housing communities that saw its stock price jump 84.5% in 2021, according to data provided by S&P Global Market Intelligence.
The company focuses on leasing and selling single-story homes from 1,000 to 2,500 square feet located in planned communities, priced to compete with what the buyer or tenant would pay for an equivalent or smaller apartment. It's clearly working.
UMH Properties is a real estate investment trust (REIT), an investing option more known for going slow and steady than pedal to the metal, but all that money pouring into the housing sector helped send this stock to a one-year price gain that roughly tripled that of the S&P 500.
Image source: Getty Images.
So what
Manufactured housing means the structure was created as modules in a factory and assembled on a pad, saving time and money compared with what's typically called stick-built construction.
Demand for lower-priced homes in those communities -- especially by retirees and aging millennials and others moving to the Sun Belt -- has helped drive the average valuation for a pad and transaction volume for this type of housing overall to record highs.
UMH Properties is riding that wave as it continues its long run of profitability. Founded in 1968 as United Mobile Homes, operating a public company since 1985, and organized as a REIT since 1992, the company now owns and operates 127 manufactured housing communities with about 24,000 homesites in 11 states. If you'd had the foresight to invest $10,000 in the stock 10 years ago, you'd have nearly $50,000 now, nearly double what an index investment like the Vanguard S&P 500 ETF would have yielded over that time.
Metrics from the most recent quarterly report also speak to how well things are going for this REIT. Rental occupancies reached 95% and home sales jumped 45% year to date, while same-property net operating income (NOI) rose 15%, reflecting the ability to raise the rent in the face of growing demand. That helped funds from operations (FFO) -- a critical measure of REIT profitability -- jump 51% year over year in the third quarter, while rental occupancies reached 95% and sales of manufactured homes jumped 45% year to date.
The company kicked off the new year with a 5% increase in its dividend, to $0.20 a share from the $0.19 it had paid quarterly through all of 2021, and that after paying $0.18 a share quarterly since the second quarter of 2008. So that's a positive sign for income investors considering this stock.
Now what
Late in the year, UMH Properties landed a joint venture deal with giant Nuveen Real Estate, and the two just made their first purchase: $22.2 million for a newly built 39-acre, 219-site manufactured housing community in Sebring, Florida, marking UMH's entry into the Sunshine State.
The company also said in its year-end report that it added 622 rental units in 2021, giving it about 8,700 in that portfolio, and expects to add an additional 800 to 900 a year going forward. It also has about 3,300 existing vacant lots to fill and nearly 1,800 acres of empty land that it expects to fill with 7,300 more finished lots. All that points to more income to share with shareholders.
"Workforce housing will remain a basic need in any environment," the company said in that December report. The company's seasoned approach to providing financing for homeownership and units for renting should find sufficient buyers and tenants to keep UMH Properties profitable and investors well rewarded for years to come, too.
