Should You Retain Mid-America Stock in Your Portfolio Now?

Mid-America Apartment MAA is poised to gain from a well-diversified, Sun Belt-focused portfolio. The prospects of its redevelopment program and technology measures will drive margin expansion, while its solid balance sheet provides a strong foundation for growth opportunities.

However, an elevated supply of rental units in some markets restricts MAA’s rent growth momentum. High interest expenses also ail.

What’s Aiding MAA?

MAA maintains a well-balanced, diverse portfolio across the Southeast, Southwest and Mid-Atlantic regions of the United States. This diversification shields the company from economic downturns in any particular market and helps generate a consistent revenue stream. Moreover, the elevated cost of single-family homeownership, compounded by persistently high interest rates, continues to fuel demand for rental apartments. Against this backdrop, MAA is expected to sustain high occupancy levels in the near term. Our projection for average physical occupancy in 2025 is 95.8%.

This Sunbelt-focused apartment REIT opts for opportunistic investments to maintain the right product mix and raise the number of apartment communities in dynamic markets. As of the end of the first quarter of 2025, it had seven communities under development, with 2,312 units at a projected total cost of $851.5 million. In a competitive pricing environment for acquisitions and the growing demand for apartment housing across its Sunbelt markets, the company’s focus on its development pipeline is a strategic fit.

MAA remains focused on its three internal investment initiatives: interior redevelopments, property repositioning projects and Smart Home installations. In the first quarter of 2025, MAA spent $6.7 million on its redevelopment program, $4.1 million on its WiFi Retrofit program and $3.2 million on its repositioning program, which the company expects to produce solid returns and continue to enhance the quality of the portfolio.

MAA enjoys a solid balance sheet, with low leverage and ample availability under its revolving credit facility. As of March 31, 2025, MAA had $1.0 billion of combined cash and available capacity under its unsecured revolving credit facility. It also has a low net debt/adjusted EBITDAre ratio of 4. In the first quarter of 2025, it generated 95.8% unencumbered NOI. Moreover, with long-term credit ratings of A- (Stable outlook) from Fitch Ratings and Standard & Poor’s Ratings Services and A3 (Stable outlook) from Moody’s, the company enjoys access to debt at favorable rates.

Solid dividend payouts are arguably the biggest enticements for REIT shareholders, and MAA remains committed to that. In the last five years, MAA has increased its dividend seven times, and its five-year annualized dividend growth rate is 11.12%. Moreover, it has a lower dividend payout compared with the industry. Backed by healthy operating fundamentals, we expect its dividend distribution to be sustainable in the upcoming period.

What’s Hurting MAA?

Although the market is witnessing early signs of recovery with better lease-over-lease rates on renewals, management expects supply pressures to ease only toward the end of 2025 and into 2026. Under the given circumstances, the struggle to lure renters will persist in the near term as supply volumes are expected to remain elevated in some Sunbelt markets. This is expected to create pressure on rent growth in the upcoming period.

Despite the Federal Reserve announcing rate cuts late in 2024, the interest rate is still high and is a concern for MAA. It has a substantial debt burden, and its total debt, as of March 31, 2025, was $5 billion. For 2025, our estimate indicates an 8% year-over-year increase in the company’s interest expenses.

Shares of this Zacks Rank #3 (Hold) company have fallen 2.3% over the past month, underperforming the industry’s growth of 3%. Moreover, the estimate revision trend for 2025 FFO per share does not indicate an upbeat outlook for this company, with estimates moving marginally southward over the past week to $8.77. Given the downward estimate revision, the stock has limited upside potential in the near term.

Stocks to Consider

Some better-ranked stocks from the REIT sector are VICI Properties VICI and W.P. Carey WPC, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for VICI Properties’ 2025 FFO per share is pegged at $2.35, up 3.98% year over year.

The Zacks Consensus Estimate for W.P. Carey’s 2025 FFO per share stands at $4.88, up 3.83% year over year.

Note: Anything related to earnings presented in this write-up represents 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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