Uncover two Outstanding Dividend Shares to Purchase Immediately for Income Generation and Capital Expansion
Uncover two Outstanding Dividend Shares to Purchase Immediately for Income Generation and Capital Expansion
Investing in dividend stocks can be lucrative. The top ones offer a reliable passive income stream and consistent stock price appreciation as they enhance their earnings. These two factors frequently lead to superior overall returns.
There are numerous excellent dividend stocks. Among them, Mid-America Apartment Communities (MAA -0.32%) and Invitation Homes (INVH) are standout options for those seeking both income and expansion.
Prepared for a resurgence in 2025 and beyond
Mid-America Apartment Communities has demonstrated steady growth over the years. This apartment-centric real estate investment trust (REIT) has increased its dividend for 14 consecutive years, extending this growth streak by 5% in December 2021. The landlord has prospered from consistent rent growth and its ever-expanding apartment arrangement.
This year, however, the REIT has faced challenges. Its funds from operations (FFO) have decreased during the first nine months of this year, falling from $6.85 to $6.65 per share. The primary reason has been an increase in new apartment supply in its Southeastern markets. This overabundance has negatively impacted occupancy and rent growth, causing a 0.4% decrease in average effective rent per unit during the third quarter.
However, the company anticipates overcoming these challenges next year due to a significant drop in new apartment supply, which should continue for several years. This outlook stems from the belief that a substantial decline in new apartment supply will result in demand surpassing supply, leading to improved occupancy and rent growth in the coming years.
Moreover, the REIT has taken a proactive approach as competitors have scaled back on new developments due to higher interest rates. Mid-America currently has eight apartment complexes under development, which it plans to complete over the next few years. Additionally, it has been actively purchasing recently constructed apartments from developers. These initiatives are expected to drive incremental earnings growth in the near future.
Mid-America's challenges have had an impact on its stock price, which currently stands 33% below its previous peak. This decline has helped boost its dividend yield, now approaching 4%. With its challenges likely to lessen, the REIT presents an attractive income opportunity and significant upside potential.
Leveraging strong demand
Invitation Homes is a residential REIT focusing on single-family rental properties. Since its initial public offering in 2017, it has raised its dividend every year, most recently by 7.7% in December 2021. Its success can be attributed to robust rent growth and expansion of its property portfolio.
Demand for single-family rental homes has remained robust. Invitation Homes maintains a high occupancy rate of 97%, with same-store rents increasing by 4.2% during the third quarter.
Invitation Homes has bolstered its existing property portfolio by adding to its inventory. It purchased 1,591 wholly owned homes for $557 million and invested an additional $37 million into 108 joint venture homes during the first nine months of the year. The REIT also expanded its third-party management platform. These new investments, along with growing rental income, contributed to a 6.8% increase in core FFO per share during the third quarter.
Invitation Homes is well-positioned to maintain its growth trajectory. Demand for single-family rental homes remains strong due to high home buying costs. Currently, it is 33% more affordable to rent than buy in the 16 core markets where Invitation Homes owns properties. This situation keeps occupancy levels high while enabling steady rent increases as leases expire.
At the same time, Invitation Homes boasts a strong financial position, enabling it to grow its portfolio further. The company has agreed to purchase approximately 2,700 homes from builders, offering a pipeline of new property additions. Additionally, it can acquire single properties on the open market, acquire rental property portfolios from other investors, and expand its third-party management platform to drive additional growth.
Despite its impressive growth, Invitation Homes' stock price has decreased by around 30% from its previous peak. This decline has boosted its dividend yield to approximately 3.5%. Given its growth potential, this REIT appears to be a compelling investment opportunity.
An appealing combination
Mid-America Apartment Communities and Invitation Homes offer attractive dividend yields due to their consistent dividend growth and stock price downturns. Meanwhile, both REITs present significant growth potential, which should enable them to deliver impressive overall returns as they expand their earnings and dividends. This makes them excellent stocks to invest in right now.
Investors looking to diversify their portfolio may find Mid-America Apartment Communities and Invitation Homes appealing, given their potential for both income and growth. With Mid-America's consistent dividend increases and stable growth in the apartment sector, as well as Invitation Homes' focus on single-family rental properties and robust demand, these REITs could offer lucrative investing opportunities in the realm of finance.