Like a lot of multifamily operators, Camden Property Trust (CPT -0.81%) had a rough ride during the height of the pandemic, working with tenants on late rent payments, waiving plans for rent increases, and eliminating some fees, among other measures.
Then 2021 arrived and the recovery began. Camden's year-end results released on Feb. 3 were impressive. Here are a few highlights from the Houston-based real estate investment trust (REIT): earnings up 4.3% for the year, funds from operations (FFO) up 10% year over year, and portfolio occupancy at 97.1%. Crucially, too, blended new and renewal leases saw rate increases of an inflation-beating 15.2% after declining by 0.2% in 2021.
And herein lies apparent opportunity: After nearly doubling during 2021, Camden's share price has fallen more than 9% so far in 2022 and is now at about $162 a share, good for a yield of about 2.3% on an annual dividend of $3.76. The shares fell as low as $99.70 last March 4 and then rallied as high as $180.37 on Dec. 31.
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Why this REIT looks ripe for a rally
Camden's own numbers and the markets it operates in both point to more good news ahead for this owner/operator of newly developed Class A and updated Class B apartments in desirable urban and suburban areas across the country. Camden is now projecting FFO of $6.09 to $6.39 a share for 2022, up from the $5.39 posted in 2021, and expects revenue to rise between 7.75% and 9.75% during the year, while expenses rise only about 3%.
That should help build on a long-term record that has seen this real estate investment trust stay competitive with the S&P 500 and perform a good deal better in total return than the CRSP U.S. REIT Index over the past decade.
CPT Total Return Level data by YCharts.
Hot Sun Belt markets and cash in its pocket
All this is due in no small part to Camden's presence in major markets experiencing strong job growth and surging housing demand, especially in the Sun Belt. The company has a portfolio of 58,300 apartment units in 171 properties. That includes 23 communities in Houston; 17 in Washington, D.C.; 15 each in Atlanta and Dallas-Fort Worth; 13 in Charlotte, North Carolina; 12 in Phoenix; 11 in Orlando, Florida; and 10 each in Raleigh, North Carolina, and Austin, Texas.
So, the core of the business -- its income-producing portfolio -- looks good. Cash also isn't a problem. At year's end, the company had about $1.5 billion in liquidity and about $885.2 million available in unsecured credit, in case it wanted to go shopping for more properties while it works off the $199.4 million it has left to fund under its existing wholly owned development pipeline.
Camden also just raised its dividend by a nice 13.3% to $0.94 a share, and its payout ratio of 48.68% based on 2022 estimates looks very modest and should leave room to not only sustain the current dividend but increase it in the quarters ahead.
All that and a somewhat beaten-down share price combine here with an attractive portfolio in fast-growing markets to point to this conclusion: It's not only not too late to buy into this REIT, and it might be a very good time indeed.
