Month-to-month Dividend Inventory In Focus: Flagship Communities REIT

Revealed on October seventh, 2024 by Felix Martinez

Flagship Communities Actual Property Funding Belief (MHCUF) has two interesting funding traits:

#1: It’s a REIT so it has a good tax construction and pays out the vast majority of its earnings as dividends.
Associated:  Record of publicly traded REITs

#2: It pays dividends month-to-month as a substitute of quarterly.
Associated: Record of month-to-month dividend shares

You’ll be able to obtain our full Excel spreadsheet of all month-to-month dividend shares (together with metrics that matter, like dividend yield and payout ratio) by clicking on the hyperlink beneath:

Flagship Communities REIT’s mixture of favorable tax standing as a REIT and a month-to-month dividend make it interesting to particular person traders.

However there’s extra to the corporate than simply these two components. Preserve studying this text to study extra about Flagship Communities REIT.

Enterprise Overview

Flagship Communities REIT is without doubt one of the Midwest area’s largest builders of residential manufactured housing communities. Its communities are positioned all through Kentucky, Ohio, Indiana, Tennessee, Arkansas, Illinois, and Missouri. With 27 years of expertise in growing and managing manufactured housing communities, Flagship has developed nice experience in actual property, financing and neighborhood administration.

The manufactured housing business has generated constant efficiency over the past 25 years.

Supply: Investor Presentation

The corporate reported its second-quarter 2024 monetary outcomes, displaying sturdy progress throughout key metrics. Rental income rose by 22.2% to $21.2 million in comparison with $17.4 million in Q2 2023, whereas identical neighborhood income elevated by 10.8%. Internet earnings greater than doubled, reaching $43.5 million, pushed by favorable changes in property values and powerful efficiency in its current communities. The REIT’s web working earnings (NOI) grew by 21.4%, though NOI margins barely decreased resulting from larger property taxes and staffing prices.

Along with monetary efficiency, Flagship accomplished the most important acquisition in its historical past, including seven manufactured housing communities (MHCs), increasing its presence in Tennessee and getting into West Virginia, its eighth operational state. The REIT additionally expanded certainly one of its communities by including 81 new heaps and raised $60 million via the issuance of items to assist these acquisitions. Occupancy ranges barely improved, reaching 83.9%, whereas identical neighborhood occupancy stood at 85.0%, regardless of the addition of latest heaps.

Wanting forward, Flagship stays optimistic concerning the MHC sector’s potential resulting from its historic outperformance and excessive obstacles to entry for brand spanking new rivals. With ongoing traits reminiscent of rising family formations and declining single-family homeownership charges, the REIT expects continued demand for inexpensive housing options. Flagship’s awards, together with Group of the 12 months for the third consecutive yr, spotlight its dedication to enhancing the standard of its properties and sustaining a robust market place.

Because of its stable enterprise mannequin, Flagship Communities REIT has loved constant progress in its hire charges and its occupancy in recent times.

Supply: Investor Presentation

Development Prospects

Flagship Communities REIT has three progress drivers in place. It tries to develop its funds from operations (FFO) per unit by elevating its rental charges yearly, by rising its occupancy charge and by lowering its working bills.

Flagship Communities REIT added 6 communities and 1,273 heaps in its asset portfolio throughout 2022. It thus grew its income, its web working earnings and its FFO by 36.5%, 35.8% and 36.0%, respectively, over the prior yr.

Additionally it is price noting that Flagship Communities REIT operates in a extremely fragmented market, with nice alternatives for consolidation. It’s estimated that the highest 50 traders management about 17% of manufactured housing heaps for hire. Due to this fact, there’s ample room for future progress.

Given the stable enterprise mannequin of Flagship Communities REIT but additionally the sensitivity of its outcomes to the gyrations of the change charge between the Canadian greenback and the USD, we anticipate the REIT to develop its FFO per unit by about 2.0% per yr on common over the subsequent 5 years.

Dividend & Valuation Evaluation

Flagship Communities REIT presently presents a dividend yield of solely 4.1%.  In actual fact, most REIT unitholders personal stakes in these firms primarily due to their engaging dividends. Due to this fact, the dividend yield of Flagship Communities REIT is prone to render this inventory appropriate for many traders.

Buyers must also remember that the dividend of Flagship Communities REIT could fluctuate considerably over time as a result of fluctuation of the change charges between the Canadian greenback and the USD.

Flagship Communities REIT’s dividend yield has resulted primarily from the corporate’s exceptionally low payout ratio, which is presently at 60%. In different phrases, the belief may provide a extra beneficiant dividend to its unitholders, nevertheless it prefers to protect funds for the acquisition and improvement of latest properties.

We additionally notice that Flagship Communities REIT has a cloth debt load in its steadiness sheet. Its web debt is presently standing at $299 million, which is 78% of the market capitalization of the inventory.

Taking into consideration the 4.1% dividend and assuming that Flagship Communities REIT will develop its FFO per unit by 2.0% per yr on common over the subsequent 5 years, the inventory may provide a 6.1% common annual complete return over the subsequent 5 years. That is an unattractive anticipated return; therefore, we advocate ready for a a lot decrease entry level earlier than buying the inventory.

Last Ideas

Flagship Communities REIT has a stable enterprise mannequin and ample room for future progress. Nevertheless, the inventory presents a dividend yield of 4.1%. Whereas Flagship Communities REIT appears to have promising progress prospects because of the extremely fragmented construction of its markets, the inventory appears absolutely valued proper now. Due to this fact, traders ought to watch for a major correction of the inventory earlier than buying it.

Furthermore, Flagship Communities REIT is characterised by extraordinarily low buying and selling quantity. Which means it’s onerous to determine or promote a big place on this inventory.

Don’t miss the sources beneath for extra month-to-month dividend inventory investing analysis.

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