Mid-America Apartment Communities Inc. (MAA), an apartment-only real estate investment trust (REIT), recently increased its dividend payout by 2% to a quarterly payment of $0.6275 per share or $2.51 on an annualized basis.

Mid-America is one of the few companies that has neither reduced nor suspended its dividend payement during the recession. Mid-America has a strong balance sheet with over $155 million of liquidity at quarter-end. The fixed charge coverage ratio was 3.3x during third quarter 2010, which was a historic high for the company and was well above the peer group median of 2.5x. Total debt was $1.55 billion at September 30, 2010, 85% of which was fixed or hedged against rising interest rates.

Mid-America divides its portfolio in two tiers, larger primary markets and lower population secondary markets. Secondary markets often have stable fundamentals due to a limited new supply. Having a diversified presence in different types of markets helps mitigate risk and decreases volatility in the event of a slowdown in any one product type.

Mid-America's diversified market profile with its focus on solid employment markets of the Sunbelt region across both the high-growth primary markets and the less cyclical secondary markets generates a stable earnings platform for the company. The weak for-sale housing market and the overall economy have further helped Mid-America maintain strong occupancy levels, as more people are opting to rent due to trouble in obtaining financing and continued housing price declines.

Furthermore, the company is witnessing a decrease in move-outs due to home purchases, which is a good sign as the battered housing market will continue to benefit residential REITs like Mid-America. We maintain our ‘Neutral' recommendation on Mid-America, which presently has a Zacks #3 Rank that translates into a short-term ‘Hold' rating. We also have a ‘Neutral' recommendation and a Zacks #3 Rank for UDR, Inc. (UDR), one of the competitors of Mid-America.