Will Mid-American REIT Rebound as Int...
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Jun
6
Jonathan Yates
Will Mid-American REIT Rebound as Interest Rates Rise?
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Investors are not pleased with the purchase of Colonial Properties Trust (NYSE: CLP) by Mid-American Properties (NYSE: MAA), as the share price has fallen since the deal was announced.  The chart below tells that tale.

 

 

But there is much too like about Mid-American Properties.

Clearly, the market was positive about Mid-American Properties before the deal.  The level of institutional ownership is very high at over 90%.  With that much stock controlled by institutional investors such as hedge funds, private equity groups, and others, there is naturally a below average beta.  That is another sign of strength for a stock.

For growth investors, earnings-per-share and sales growth is soaring.  On a quarterly basis, sales growth is higher by 14.69%.  For the year, earnings-per-share growth has surged by 76.86%.

There is not much to find on the balance sheet or capital structure that is undervalued.  The debt-to-equity ratio is 1.80, which is high.  The price-to-earnings growth ratio, price-to-book ratio, and price-to-sales ratio are also fully valued.  There is little cash on the books, too.

But there is a unmistakable trend that benefits Mid-American Properties.

During The Great Recession when stock and bond prices fell, rental income rose in the United States.  Fewer bought homes during The Great Recession, which increased the demand for rental properties.  From that, the level of rents rose.

That could happen again with interest rates rising.  With mortgage rates now over 4%, it will make it more difficult for many to get a loan to buy a home.  There will be more renters, increasing the demands.  Rents will rise even more.  That should benefit Mid-American Properties and please the market.  Until then, there is a dividend yield of 4.15% to keep shareholders happy until the price bounces back.



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