Blue-chip companies are some of the most reassuring stock market investments. They're financially sound, they have strong management, and they're leaders in their own markets. They're often huge, and usually well-known.
But it doesn't take a household name to give income-seeking investors that kind of safety and stability. A great example is Mid-America Apartment Communities (MAA 1.60%).
This Memphis-based real estate investment trust (REIT) is one of the country's largest multi-residential property owners, with a portfolio of about 102,000 units in markets that are known for strong job and population growth. Atlanta and Dallas lead the list with nearly 13% and 10% of its units, respectively, followed by Tampa (6.9%) and Orlando (6.5%) in Florida; Austin, Texas (6.4%); and Charlotte, North Carolina (6.2%).
But Mid-America is not just throwing darts at census data here. Its seasoned executive team (each averaging 20 years of tenure with the company) has honed a strategy that focuses strongly on A and B+ quality apartments in key suburban, inner loop, and satellite markets; these are primarily garden apartments with a healthy smattering of mid-rise buildings.
The REIT also strategically buys and sells to fit that strategy and has an active redevelopment pipeline that currently has some 11,000 units being modernized with technology and other updates.
The result is strong total returns
As a REIT, Mid-America is legally obliged to return at least 90% of its taxable income to shareholders, and that has helped this dividend stock build a strong long-term record.
VNQ total return level; data by YCharts.
The chart above shows how Mid-America has fared in total return over the past decade against two benchmark exchange-traded funds (ETFs): the Vanguard S&P 500 ETF, representing the major market, and the Vanguard Real Estate ETF, which holds about 160 of the 225 or so publicly traded REITs at any given time.
A 3.6% yield and 13 straight years of dividend increases
Mid-America yields about 3.6% at recent prices, while the S&P 500 proxy here is yielding about 1.5%. That points to Mid-America's chops as a solid choice for steady income and growth.
So does this residential REIT's record of paying quarterly dividends without interruption or reduction since 1994. That's when it went public with a portfolio of about 6,000 units in 24 developments. It includes a current streak of 13 years of dividend hikes that have it paying $1.40 a share quarterly after a 12% bump to start 2023.
Along with dividend increases, a key indicator of stability and growth for REITs are funds from operations (FFO), considered equivalent to earnings per share (EPS) for non-REIT stocks. This chart shows how reliably Mid-America has grown both dividends and FFO over the past decade.
MAA FFO per share (TTM); data by YCharts. TTM = trailing 12 months.
Business value beats name value
Management is guiding for FFO of $9.11 per share this year, which would mean you would be buying its stock at a price-to-FFO ratio of 16.9 at its recent price of $154 a share. That's down from 18.9 when the stock hit its 52-week high last August before its price was driven down to as low as about $138 before bouncing back.
Mid-America also boasts a rock-solid balance sheet with an A3/A-minus Moody's credit rating, and an impressive 3.5 ratio of net debt to EBITDA (earnings before interest, taxes, depreciation, and amortization). All that stability and past performance is informing an eye toward future performance that this REIT's seasoned management should be able to execute on successfully.
It's not a household name, but Mid-America just keeps growing its decades-long record of providing households a place to while it profitably and effectively continues to provide investors with good reasons to take their own stake.
