Analysts Just Upgraded These 3 Residential REITs

Real estate investment trusts (REITs) have had their share of tough times since the beginning of 2022, but 2023 seems to be ushering in a more positive view by analysts, and July has seen a number of stock upgrades and increased price targets. 

Analysts are seeing better times ahead, assuming the Federal Reserve eases up on the severity and duration of interest rate hikes. Goldman Sachs' recent revision of recession odds from 25% to 20% over the next year is also augmenting the projections for REITs going forward.

Take a look at three residential REITs that recently received analyst upgrades. Two of the three have also received price target increases.

Apartment Income REIT Corp. AIRC, also known as AIR Communities, is a Denver-based residential REIT that focuses on apartment communities. Its 23,000 apartment units in 94 communities are located in major metropolitan markets across 10 states and Washington, D.C. Apartment Income REIT was originally part of Apartment Investment and Management Co. (AIMCO) but became an independent publicly traded REIT in 2020.

On July 18, BMO Capital Markets analyst John Kim upgraded Apartment Income REIT from Market Perform to Outperform and raised the price target from $39 to $42. From its recent closing price of $35.75, that represents a potential gain of 17.4%.

On June 6, AIR Communities announced it has formed joint ventures with two unnamed real estate investors to recapitalize 11 properties. Apartment Income REIT will hold a 53% stake in the first partnership and a 30% stake in the second one. The properties are valued at approximately $1.2 billion. Apartment Income will receive $600 million upfront and annual margins of $2.5 million for asset and property management fees.

AIR Communities began paying a $0.43 dividend in February 2021 but since that time has only raised its dividend to $0.45. The annual dividend amount of $1.80 presently yields 5.03%.

Camden Property Trust CPT is a Houston-based residential REIT that owns and manages apartment complexes. As of June 30, it held 171 properties with 58,564 units in major cities across the U.S. Its strategy is to focus on high-growth markets with a diverse portfolio of assets. Some of its apartment complexes also contain ground-floor retail space, offices or mixed-use space. Camden Property Trust is a member of the S&P 500.

On July 18, BMO Capital analyst Kim upgraded Camden Property Trust from Market Perform to Outperform and raised the price target from $125 to $126. From its most recent closing price of $110.75, that represents a potential gain of 13.7%.

On July 6, Citigroup analyst Nick Joseph reiterated a Neutral rating on Camden Property Trust and maintained a $130 price target. That's a potential gain of 17.3%.

Over the past five years, Camden Property Trust has raised its dividend 29.8% from $0.77 to $1 per share. The present annual dividend of $4 per share now yields 3.57%.

Sun Communities Inc. SUI is a Southfield, Michigan-based residential REIT that acquires, operates and develops manufactured home and RV communities. Established in 1975, Sun Communities offers both rentals and homes for sale and also specializes in developments for ages 55 and older.

On July 12, Wolfe Research analyst Andrew Rosivach upgraded Sun Communities from Peer Perform to Outperform and announced a $155 price target. From its recent closing price of $133.46, that represents a potential gain of 16.1%.

On June 14 JMP Securities analyst Aaron Hecht reiterated a Market Outperform view on Sun Communities and maintained a $160 price target. In May, Wells Fargo, RBC Capital Markets and Baird all maintained Outperform or Equal-Weight ratings on Sun Communities.

Since 2019, Sun Communities has increased its annual funds from operations (FFO) from $4.85 to $7.30. Over the past five years, it has increased its quarterly dividend from $0.71 to $0.93 per share, a gain of 30.9%. The yield on the annual $3.72 dividend is presently 2.8%.

Over the past few decades, manufacturing home REITs have performed extremely well. Since August 1995, Sun Communities has had a total return of 723.76%, with an average annualized return of 7.83%.

Investors should keep in mind that analysts are not always correct with their predictions, and it's best for each investor to do their own due diligence rather than rely on an analyst to make stock transactions.

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