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Revealed on March twenty fourth, 2023 by Aristofanis Papadatos
Flagship Communities Actual Property Funding Belief (MHCUF) has two interesting funding traits:
#1: It’s a REIT so it has a positive tax construction and pays out the vast majority of its earnings as dividends.
Associated: Listing of publicly traded REITs
#2: It pays dividends month-to-month as a substitute of quarterly.
Associated: Listing of month-to-month dividend shares
You possibly can 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 buyers.
However there’s extra to the corporate than simply these two components. Maintain studying this text to study extra about Flagship Communities REIT.
Enterprise Overview
Flagship Communities REIT is among the Midwest area’s largest builders of residential manufactured housing communities. Its communities are situated all through Kentucky, Ohio, Indiana, Tennessee, Arkansas, Illinois, and Missouri. With 27 years of expertise in creating 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 during the last 25 years.
Supply: Investor Presentation
As proven within the above chart, the manufactured housing business has generated superior development of same-property internet working earnings when in comparison with most different forms of properties during the last twenty years. Additionally it is essential to notice that the manufactured housing business continued rising same-property internet working earnings even throughout the Nice Recession, which was the worst housing disaster of the previous 80 years. It’s thus evident that the enterprise of Flagship Communities REIT provides vital benefits to buyers.
Manufactured homes are enticing for a lot of people, who can’t afford rather more costly conventional homes. These people resort to manufactured homes and thus they’ve the delight of residence possession.
Because of its strong enterprise mannequin, Flagship Communities REIT has loved constant development in its lease charges and its occupancy in recent times.
Supply: Investor Presentation
Furthermore, Flagship Communities REIT at present enjoys optimistic enterprise momentum. Within the fourth quarter of 2022, the belief grew its same-property internet working earnings by 8.2% and its rental income by 29% over the prior yr’s quarter. Nonetheless, its adjusted funds from operations (FFO) per unit dipped 6%, primarily on account of bills associated to non-completed acquisitions of properties, which didn’t meet the standards of administration. On the brilliant aspect, these bills are non-recurring in nature and therefore the REIT is probably going to enhance its FFO per unit within the upcoming quarters.
Progress Prospects
Flagship Communities REIT has three development drivers in place. It tries to develop its funds from operations (FFO) per unit by elevating its rental charges yearly, by growing its occupancy charge and by decreasing 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 internet working earnings and its FFO by 36.5%, 35.8% and 36.0%, respectively, over the prior yr.
Additionally it is value noting that Flagship Communities REIT operates in a extremely fragmented market, with nice alternatives for consolidation. It’s estimated that the highest 50 buyers management about 17% of manufactured housing heaps for lease. Subsequently, there’s ample room for future development.
Given the strong 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 is at present providing a dividend yield of only one.0%. This is among the lowest dividend yields in your entire REIT universe. In truth, most unitholders of REITs personal stakes in these firms primarily for his or her enticing dividends. Subsequently, the exceptionally low dividend yield of Flagship Communities REIT is more likely to render this inventory unsuitable for many buyers.
Traders also needs to bear in mind 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.
The low dividend yield of Flagship Communities REIT has resulted primarily from the exceptionally low payout ratio of the corporate, which is at present standing at 18%. In different phrases, the belief might supply a extra beneficiant dividend to its unitholders nevertheless it prefers to protect funds for the acquisition and improvement of latest properties.
We additionally observe that Flagship Communities REIT has a cloth debt load in its stability sheet. Its internet debt is at present standing at $425 million, which is 126% of the market capitalization of the inventory. That is definitely disappointing, because the preservation of funds from the low dividend payout would usually be anticipated to lead to a stronger stability sheet.
In reference to the valuation, Flagship Communities REIT is at present buying and selling for 18.0 occasions its FFO per unit within the final 12 months. We contemplate this a good valuation stage for this REIT, which has a strong enterprise mannequin and promising development prospects.
Taking into consideration the 1.0% 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 might supply a 3.0% common annual complete return over the subsequent 5 years. That is an unattractive anticipated return and therefore we advocate ready for a a lot decrease entry level earlier than buying the inventory.
Remaining Ideas
Flagship Communities REIT has a strong enterprise mannequin in place, with ample room for future development. Nonetheless, the inventory is providing an exceptionally low dividend yield of 1.0%, one of many lowest yields within the REIT sector. In consequence, the inventory is probably going not appropriate for income-oriented buyers.
Whereas Flagship Communities REIT appears to have promising development prospects due to the extremely fragmented construction of its markets, the inventory appears totally valued proper now. Subsequently, buyers ought to look forward to a big 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 arduous to ascertain or promote a big place on this inventory.
If you’re keen on discovering extra high-quality dividend development shares appropriate for long-term funding, the next Positive Dividend databases will probably be helpful:
The main home inventory market indices are one other strong useful resource for locating funding concepts. Positive Dividend compiles the next inventory market databases and updates them month-to-month:
Thanks for studying this text. Please ship any suggestions, corrections, or inquiries to [email protected].
Thanks for studying this text. Please ship any suggestions, corrections, or inquiries to [email protected].
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