Why Camden Property Remains a Solid Hold in the Current Market

Camden Property Trust CPT is well-poised to gain from the healthy renter demand for its residential properties in the high-growth markets of the United States amid favorable demographic trends, a healthy job market and high homeownership costs. The company’s diversification efforts in urban and suburban markets are likely to drive stable revenues. 

CPT’s focus on leveraging technology to drive margin expansion is encouraging. A strong development pipeline backed by a healthy balance sheet position augurs well for long-term growth. 

However, the elevated supply of rental units in certain markets is likely to fuel competition, impeding the rent growth momentum to some extent. High interest rates add to its woes.

What’s Supporting CPT Stock?

Camden focuses on high-growth markets with strong resident demographics, supporting consistent rental income. These markets are marked by robust job creation in high-wage industries and positive in-migration trends. Camden has a diverse portfolio with a superior product mix of A/B quality properties in urban and suburban markets. Per the company’s February operating update, CPT has witnessed better occupancy and blended lease rate growth since the beginning of the first quarter of 2025 through Feb. 27 in comparison to the fourth quarter of 2024.

Camden is leveraging technology, scale and organizational capabilities to drive margin expansion in its portfolio. Such efforts are likely to bring operational efficiency and reduce costs, aiding NOI growth. In 2024, the company’s efforts to this effect generated an annual NOI amounting to $55 million.

Camden has a healthy balance sheet with ample liquidity, placing it well to capitalize on long-term growth opportunities. As of Dec. 31, 2024, the company had more than $1.0 billion in liquidity, including $21 million in cash and cash equivalents and around $1.0 billion available under its unsecured credit facility.

CPT has a well-laddered debt maturity schedule with a weighted average year to maturity of 6.2 years. In addition, in the fourth quarter of 2024, its annualized net debt to annualized adjusted EBITDAre was 3.8 times and unencumbered assets to NOI was 93.5%, providing scope for tapping the additional secured debt capital if required.

Solid dividend payouts are arguably the biggest enticement for REIT investors, and Camden remains committed to shareholder value accretion. In the past five years, it has increased its dividend five times, and the annualized dividend growth rate for this period is 6.21%. Backed by strong operating fundamentals and solid balance sheet strength, we expect the company’s dividend distribution to be sustainable in the upcoming period.

What’s Hurting CPT Stock?

Camden is likely to continue facing challenges in attracting renters, particularly in markets where supply remains elevated — though management anticipates a gradual moderation over time. Additionally, competition from alternative housing options, including other rental apartments, condominiums and single-family homes, puts pressure on the company’s ability to raise rents and maintain high occupancy levels, somewhat constraining its growth trajectory.

Despite the Federal Reserve announcing rate cuts late in 2024, the interest rate is still high and is a concern for Camden. Elevated rates imply a higher borrowing cost for the company, which would affect its ability to purchase or develop real estate. The company has a substantial debt burden, and its total debt as of Dec. 31, 2024 was approximately $3.49 billion.

Over the past year, shares of this Zacks Rank #3 (Hold) company have rallied 10.3% compared with the industry's rise of 2.1%. However, analysts do not seem to have an overtly bullish view on the stock now, with the Zacks Consensus Estimate for 2025 FFO per share remaining unchanged over the past month at $6.76.

Stocks to Consider

Some better-ranked stocks from the broader REIT sector are Welltower Inc. WELL and Cousins Properties Incorporated CUZ. Welltower and Cousins Properties carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Welltower’s 2025 FFO per share is pegged at $4.95, which indicates year-over-year growth of 14.6%.

The Zacks Consensus Estimate for Cousins’ 2025 FFO per share is pegged at $2.79, which implies a year-over-year increase of 3.7%.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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This article originally published on Zacks Investment Research (zacks.com).

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