Zacks Investment Ideas Feature Highlights: Associated Estates Realty Corp, Post Properties, AvalonBay Communities, UDR and MAA

Mar 24, 2011, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, March 24, 2011 /PRNewswire/ -- Today, Zacks Investment Ideas feature highlights Features: Associated Estates Realty Corp (NYSE: AEC), Post Properties, Inc. (NYSE: PPS), AvalonBay Communities, Inc. (NYSE: AVB), UDR, Inc. (NYSE: UDR) and MAA (NYSE: MAA).

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Profit from the Housing Crash

One way to play this trend is to invest in apartment real estate investment trusts (REITs). One of the great benefits of REITs is that they typically pay a fat dividend. This is because REITs pay no federal income tax as long as they pass on at least 90% of their net income to shareholders through dividends.

Here is a list of Apartment REITs benefiting from the housing crash:

Associated Estates Realty Corp (NYSE: AEC) owns and manages apartment communities in the Midwest, Mid-Atlantic and Southeast regions of the U.S. Its portfolio consists of 52 properties containing 13,662 units in 8 states.

AEC has been diversifying away from the Midwest (where homeownership rates are higher and rents are lower) to higher growth, higher rent markets. The move is paying off. Physical occupancy was 94.7% at the end of 2010, up from 93.9% at the end of 2009. Furthermore, average net rent collected rose 2.1% to $866 per month.

Shares trade at just 14.6x forward earnings, which is in-line with the industry average. AEC also pays a dividend that yields 4.4%.

It is a Zacks #1 Rank (Strong Buy) stock.

Post Properties, Inc. (NYSE: PPS) develops and operates upscale apartment communities in the Southeastern and Southwestern U.S.

Post delivered its sixth consecutive positive earnings surprise in February. Funds from Operations (FFO) rose 26% in the fourth quarter of 2010 as occupancy rates increased from 94.4% to 95.2%.

Analysts expect FFO of $1.61 per share in 2011, a 33% increase over 2010. Post also pays a dividend that yields 2.2%.

It is a Zacks #1 Rank (Strong Buy) stock.

AvalonBay Communities, Inc. (NYSE: AVB) develops and manages apartment communities in high barrier to entry markets throughout the U.S.

Within its established communities, average rental rates rose 2.9% in the fourth quarter of 2010. Management expects this trend to continue in 2011. It gave FFO guidance of $4.50 to $4.75 per share. The Zacks Consensus Estimate is within this range at $4.63, representing 16% growth over 2010.

AvalonBay pays a dividend that yields an attractive 3.0%. It is a Zacks #2 Rank (Buy) stock.

UDR, Inc. (NYSE: UDR) owns and manages middle-market apartment communities. As of December 31, 2010, it owned or had an ownership position in 59,614 apartment homes.

Physical occupancy in the fourth quarter of 2010 was an impressive 95.6%, up 20 basis points from the same quarter in 2009. Management expects revenue to increase 3.5% to 4.5% in 2011 and a 95% occupancy rate. FFO per share is expected to be between $1.20 and $1.25. The Zacks Consensus Estimate is within guidance at $1.24. This equates to 13% growth over 2010 FFO per share.

UDR yields 3.2%. It is a Zacks #3 Rank (Hold) stock.

MAA (NYSE: MAA) owns and operates apartment communities in the Sunbelt regions of the U.S.

Physical occupancy was 95.8% in the fourth quarter of 2010, up 0.6% from the same quarter in 2009. Effective rent per unit was up 0.3% to $723.40.

MAA has a history of steadily raising its dividend. It currently yields an attractive 4.0%.

Shares trade at 15.4x forward earnings. It is a Zacks #3 Rank (Hold) stock.

Conclusion

The apartment REIT industry should experience a nice tailwind over the next several years as homeownership rates fall and apartment occupancy rates rise. These five stocks are a great way to ride this trend while enjoying solid dividend income along the way.

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