Camden: Residential Returns

02/13/2015 7:00 am EST

Focus: REITS

John Dobosz

Editor, Forbes Premium Income Report and Forbes Dividend Investor

Helped by persistently low interest rates, real estate investment trusts have been among the best performing industry groups in 2015. This new recommendation is a REIT focused in the residential space, notes John Dobosz, editor of Forbes Dividend Investor.

Houston-based Camden Property Trust (CPT) is one of the biggest publicly-traded apartment REITs. As of January 31, 2015, Camden owned interests in and operated 167 properties containing 58,664 apartment units.

Its properties are higher-end residences located across the United States in ten states: Texas, Arizona, Colorado, California, Georgia, Florida, North Carolina, Virginia, and Maryland.

Camden shares are up more than 30% in the past year but down $4 from a 52-week high hit one week ago. Coinciding with a drop in the overall REIT market tracked by the Cohen & Steers Realty Majors (ICF), Camden’s shares sold off after the company reported fourth quarter and full-year 2014 results.

Based on funds from operations, which adds back depreciation and amortization expenses to earnings, Camden’s $0.99 per share for the fourth quarter fell short of analysts’ consensus $1.02 forecast.

However, revenue of $216.5 million exceeded the $215.8 million forecast.  On a full-year basis, 2014 same-property net operating increased 4.9% compared to 2013.

One very nice bit of news in the release was a 6.1% dividend increase to $0.70 per quarter. Camden has paid dividends every quarter since October 1993, but it did slash the payout from $0.70 to $0.45 in June 2009 in the wake of the financial crisis.

It’s steadily risen back to its old level, currently good for a 3.65% yield. The ex-dividend date for the $0.70 dividend is March 27.

Based on historical valuations, Camden looks cheaply priced. Its price to sales ratio would need to grow 9% to get back to its five-year average.  

Its enterprise value dividend by expected 2015 EBITDA of 14.7 is 22% lower than the five-year average of this ratio.  For these discounted valuations, along with the rising dividend payouts, Camden is worth buying at current prices.

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