Home Properties, Inc.
) continues to benefit from a struggling housing market. The
apartment REIT has seen an increase in both rents and occupancy
rates as more and more Americans opt to rent rather than buy.
Home Properties recently delivered strong fourth quarter 2011
results and management gave bullish guidance for 2012. This
prompted analysts to revise their estimates higher, sending the
stock to a Zacks #2 Rank (Buy).
The company also pays a dividend that yields a juicy 4.6%.
Home Properties, Inc. is an apartment REIT with properties
primarily in selected Northeast and Mid-Atlantic markets. The
company owns and operates 124 communities containing 41,951
It is headquartered in Rochester, New York and has a market cap of
Fourth Quarter Results
Home Properties delivered better than expected fourth quarter
results on February 9. Funds from operation (FFO) per share came in
at 93 cents, beating the Zacks Consensus Estimate of 89 cents. It
was an 11% increase over the same quarter in 2010.
Total revenue was up 12% year-over-year to $153 million, ahead of
the Zacks Consensus Estimate of $149 million. Average monthly rents
rose 4.7% year-over-year to $1,195 while physical occupancy climbed
20 basis points to 95.3%.
These factors led to a 9% increase in net operating income over the
Following a strong 2011, management provided 2012 FFO guidance of
$3.79-$3.95 per share, prompting analysts to increase their
estimates. This sent the stock to a Zacks #2 Rank (Buy).
The Zacks Consensus Estimate for 2012 is now $3.89, within
guidance, and representing 10% growth over 2011 FFO. The 2013
consensus estimate is currently $4.15, corresponding with 7%
Expect both rents and occupancy rates to continue rising in 2012
given the strong demand for apartments.
In addition to solid growth, Home Properties pays a dividend that
yields a stellar 4.6%. The company did cut its dividend in early
2010 but has raised it twice since then. It is currently a penny
below its pre-cut high.
The valuation picture looks reasonable for HME. Shares trade at
14.8x 2012 FFO, in-line with the industry median and its 10-year
Its price to tangible book value ratio of 2.0 is also in-line with
its peers and its historical multiple.
The Bottom Line
With favorable industry trends, rising estimates, a 4.6% yield and
reasonable valuation, Home Properties offers a lot too like.
Todd Bunton is the Growth & Income Stock Strategist for
and Co-Editor of the
Reitmeister Value Investor
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