With the S&P 500 a bit wobbly in the last few weeks, many investors are looking for rock-solid stocks to put their money into. The big names of the world are givens, but you might want more of an opportunity than the stocks the rest of the market is also watching. So what about some of the smaller guys?
For my money, the first stock I'd turn to in uncertain times would be UMH Properties (UMH 0.54%). You might not have heard of UMH, but there's a lot to love about it, including a solid and uninterrupted dividend track record going back to the Great Recession.
NYSE: UMH
Key Data Points
What is UMH Properties?
UMH Properties is a real estate investment trust (REIT) that focuses on buying, renting, and growing mobile home parks. It owns some of the biggest trailer courts in the country.
In fact, UMH has such a special moat that it doesn't have much in the way of direct competitors, since most mobile home parks are small and owned by relatively small owners. These facilities often get a bad rap, but UMH vets its tenants just like any apartment-holding REIT. However, it has one distinct advantage in the rental space: It can offer a less expensive housing unit with less density and little competition.
UMH owns 135 communities, which include nearly 26,000 developed sites, and about half of them are occupied by a mobile home that UMH rents to the public. The other sites are available for rent to someone who wants to move a mobile home in or who already purchased a mobile home directly from UMH. These parks are located across New Jersey, New York, Ohio, Pennsylvania, Tennessee, Indiana, Michigan, Maryland, Alabama, South Carolina, and Georgia.
Mobile homes versus apartment units
The particular moat that UMH has built is significant for its market. As of November 2023, the average two-bedroom apartment in the U.S. cost renters $1,317 per month. These same renters, however, can go to a UMH community and find something similar, if not larger, to rent for just $951 per month, on average. This is why the occupancy rate in UMH communities averages 95.1%, even though several are experiencing expansion or redevelopment.
These rents aren't lagging behind, either. In 2022, the average rent for a UMH mobile home was $873, and pre-pandemic, it was $765. The growth in rent has been colossal.
In addition to renting entire homes, UMH offers spaces to rent for people who already own mobile homes. Unlike stick-built houses, mobile homes are considered personal property and must have a place to be permanently installed. That's what most mobile home communities are primarily about -- offering lots for rent that are wholly apart from the dwelling unit. These rental units require almost no maintenance or effort on the part of the park holder, which helps to increase the park's income without significant additional cost.
UMH communities have a total of nearly 16,000 lots available for rent to people who already own their mobile homes, and it rents these at an average of $528 per month. Again, that's just the land below the unit, access via a road, and any shared green space -- everything else is the responsibility of the homeowner. It's a great way to balance the increased risk of being a landlord to so many homes that the REIT fully owns and must maintain.
This balancing act has allowed UMH to provide a solid dividend for years, despite being a low-priced stock.
UMH's high-yield dividend is reliable
Trading at just $18.12 at the end of the trading day on Aug. 6, UMH stock is accessible to anyone, no matter where they trade or how they trade. The dividend for last year was $0.82 per share, giving stockholders a $4.53 return annually for every $100 they invested at this price.
Although UMH's dividend was cut in 2007 and 2008, it has remained steady or increased since then. It was understandable that 2007 and 2008 saw declines in dividends because most of the world experienced severe real estate slumps. Mobile homes aren't immune to global economic pressures, unfortunately.
But since 2021, that dividend has been growing at a steady clip, seeing a 5.5% increase between 2020 and 2021, a 5.2% increase from 2021 to 2022, and a 2.5% increase from 2022 to 2023. It's expected to grow again by 3.65% in 2024. That's a total dividend growth of over 18% in four years.
It may seem like a lot in such a short time, but the company has been paying down debt and adding value to the assets it already has. This includes 3,069 new lots under development between now and 2029, so it makes perfect sense that dividend growth would follow that effort.
For my money, UMH is the place to go. The dividend is amazing but sustainable, and people are going to need affordable housing in the future.
