In this research article we cover Preferred Apartment Communities Inc. NYSE: APTS Stock Analysis. I Navjot Virk will be your host
APTS is a Real estate investment trust founded in 2009 that owns & manages – Multifamily apartments, Office, Retail properties and make real estate loan investments.
As of 6th Nov 2020, APTS shares are trading at $5.38 per share and the company’s market cap is 271.415 million.
The stock is currently trading at $5.38 that’s 61.76% lower from its 52 week high of $14.07 and 75.21% lower from its 5 year high of $21.70
APTS is currently trading very close to its 52 week low of $5.01
Does this provide a good opportunity to start a position ?
Recent News
- 3rd Nov 2020 Company announced sale of student housing assets to TPG Real Estate Partners for aggregate gross proceeds of $478.7 million, which will result in net proceeds at closing of approximately $245.0 million, after the satisfaction of $233.7 million of property level debt and other closing adjustments and costs. Basically adding another $245 million to companies current liquidity.
- Rent Collection per Business Update presentation stands at: 99% collected for Multifamily, 94% collected for Retail (mostly Grocery properties) and 100% for Office properties for the month of August 2020 but important piece to notice here is these percentages are not adjusted for deferrals, so technically the company is reporting they are receiving rent for a specific month but the rent money may not materialise for a while, would had liked if the data was adjusted for deferrals and provide more transparency to investors on what percentage of rent is being collected each month but not what will be collected at later stage but the Management is confident the company is well positioned to navigate the pandemic. more info here (page 3).
Rent Collections
Real Estate Assets
APTS Q3 Earnings 2020 Summary
- Multi-housing (residential assets) represent 57% of companies revenue and the company has collected 97% rent in October on this segment of the business and expected to increase to 99%. Multifamily revenue down 3% from 3rd quarter from last year.
- Office comprises 22% of companies revenue and the company has collected 99% rent, and the properties are quality class A properties in sunbelt markets. Work from home trend due to pandemic poses some risk but only 11% of leases are expiring in 2020.
- Revenue from properties business grew 9% from same quarter last year. But the company had lower revenues in the loan business.
- With issuance of a bunch of preferred stock (which you can see in dilution section) and payment of preferred dividend in cash this year has significantly increased dividend load on the company with increase of 6 millions.
Q3 2020 Financials
Source: Earnings Call 10th Nov 2020
Fact’s to Keep in Mind
Dilution
Company in the past had diluted shareholders to fund operations.
Recent dilution took place in July 2020 when company issued 10,421 shares of Series A1 Redeemable Preferred Stock and collected net proceeds of $9.4 million after commissions and fees and issued 4,123 shares of Series M1 Redeemable Preferred Stock and collected net proceeds of approximately $4.0 million after commissions and fees.
APTS Dividends
- Company is currently paying an annual dividend of $0.70 a share and $0.175 quarterly.
- At current november 2020 share price APTS is paying a 13.01% yield
- APTS made a dividend cut during pandemic reducing dividend per share from $1.05 annually to $0.70 (or from $0.263 to $0.175 quarterly), thats a reduction of one third that is 33.3%
And going forward an important question in investors mind is ? Is APTS dividend safe ? Can the company continue paying current dividend or to expect an another cut ?
Let’s look at companies dividend history to predict management style that can help us make assumptions on – How well have APTS rewarded their shareholders in the past?
Dividend History
- Company has continuously paid a dividend since July 2011 for straight 10 years, and the shareholders has also seen a significant dividend growth before recent cut was made due to pandemic. That’s a good sign that the company is a consistent dividend payer. Even though past performance is not a guarantee for future performance but it does show the management is dedicated or at-least interest in providing a dependable growing income to shareholders and as the time goes and company matures the dividend should also get more solid.
Profitability
The company is currently unprofitable and thats where it bears risk. A nice peer company example for APTS would be AvalonBay Communities (AVB) which is currently trading at 24 billion in market cap. and it was established over 25 years ago in comparison to fairly young APTS and its small valuation, once the company gets profitable the stock should provide good returns like shareholders have enjoyed in AVB but bear in mind these prediction may not materialise due to variety of reasons but there is a good chance they will at-least to some point.
The stock makes a cut for someone who has a longer horizon and is looking for growth but without paying valuations for other popular growth stocks, APTS is still fairly unknown name in the market, and I didn’t find it until I went on a research spree.
Conclusion
The stock looks very undervalued at this time. And I feel it present a good opportunity to buy and start a decent position.
More new insights will be added on the company in coming weeks so stay tuned and check back again in a week or two, don’t forget to bookmark the page.
More details on the company can be found here and Q2 2020 10Q can be found here
Queries and topics this article covers – APTS stock analysis, why is apts stock going down, preferred apartment communities news, apts stock dividend, preferred apartment communities revenue, preferred apartment communities preferred stock, apts stock news
Disclaimer & Disclosure: This is not an investment advice please do your own due diligence before investing in the market. I your host currently own a small position in APTS and will be growing to over time or might sell if fundamentals change drastically, but when that happens I will post an update on this very same page, so feel free to bookmark the page for recurring updates.
