Is it Wise to Retain UDR Stock in Your Portfolio Now?

UDR Inc. UDR is well-poised to benefit from its diversified portfolio in the coastal and Sunbelt markets. Healthy demand for rental units in its markets amid favorable demographic trends and technological improvements are likely to aid the residential REIT. A healthy balance sheet provides financial flexibility for portfolio expansion. However, the elevated supply of residential rental units in some of its markets is a concern.Shares of this REIT, carrying a Zacks Rank #3 (Hold), have risen 12.5% over the past six months, outperforming the industry’s growth of 9.8%.Analysts also seem positive about this stock, with the Zacks Consensus Estimate for its 2024 fund from operations (FFO) per share being revised marginally northward over the past month to $2.47.Image Source: Zacks Investment ResearchWhat’s Aiding UDR?UDR has a geographically diverse portfolio with a superior product mix of A/B quality properties, including 30% urban and 70% suburban communities in coastal and Sunbelt locations. This diversification limits volatility and concentration risks while aiding the company to generate steady operating cash flows.In UDR’s markets, demographic growth continues to be encouraging in the young adult age cohort with a higher propensity to rent. This age cohort has witnessed a considerable part of net job growth, which has helped spur primary renter demand, poising the company well for growth. We expect UDR’s total revenues to increase by 2.5% in 2024.UDR is leveraging technological initiatives and process enhancements to bring operational resiliency across its platform, aiding in enhanced customer experience. Such efforts are likely to give it a competitive edge over others and enable it to capture additional net operating income (NOI), driving long-term profitability. We estimate the same property NOI to increase 1.7% each for 2025 and 2026, respectively.UDR continues to focus on disciplined capital distribution and maintaining a healthy balance sheet position. As of Sept. 30, 2024, UDR had $1.0 billion of liquidity. Also, 87.3% of its NOI is unencumbered, and investment-grade credit ratings of Baa1(Stable) and BBB+(Stable) from Moody's Investors Service and S&P Global Ratings, respectively, enable it to procure debt financing at an attractive cost.UDR has increased its dividend five times in the last five years, and its five-year annualized dividend growth rate is 4.91%, which is encouraging. Given UDR’s solid financial position, its dividend seems sustainable and well-covered by cash flow from operations. Such efforts boost investors’ confidence in the stock.What’s Hurting UDR?The struggle to lure renters is likely to persist as the volume of new deliveries remains elevated in several markets where the company operates. The Sunbelt markets experienced increased absorption of higher absolute deliveries at the cost of more concessions and reduced pricing power.Despite the Federal Reserve announcing rate cuts in recent times, the interest rate is still high and is a concern for UDR. The company has a substantial debt burden, and its total debt as of Sept. 30, 2024 was $5.9 billion. We estimate interest expenses to increase by 6.8% year over year in 2024.Stocks to ConsiderSome better-ranked stocks from the residential REIT sector are Equity Lifestyle Properties ELS and Veris Residential (VRE), 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 Equity Lifestyle Properties’ 2024 FFO per share is pegged at $2.92, suggesting year-over-year growth of 6.2%.The Zacks Consensus Estimate for Veris Residential’s 2024 FFO per share stands at 58 cents, indicating an increase of 9.4% from the year-ago reported figure.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.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 228 positions with double- and triple-digit gains in 2023 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report United Dominion Realty Trust, Inc. (UDR): Free Stock Analysis Report Equity Lifestyle Properties, Inc. (ELS): Free Stock Analysis Report Veris Residential, Inc. (VRE): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks