John Reese selects stocks based on a detailed historical analysis of the strategies of many of the s...
American Campus: Educated REIT
12/11/2015 7:00 am EST
Our latest recommendation leads in a large and fragmented market, in this case student housing, explains Genia Turanova in The Complete Investor.
American Campus Communities (ACC) is rewarding investors with dividend increases.
In May it raised its quarterly dividend to 40 cents from 38 cents, a 5% increase that brings the current yield to a high 4.1%. But that’s not the only reason we like the REIT.
Its market share is currently around 4.7%, with approximately 6.3 million enrolled students in 280 target markets.
Limited supply of student housing options in many of its markets makes it easier for American Campus Communities to raise rents and to grow.
But it also has managed—over the past three years—to achieve comparable levels of rental growth even in those markets where it doesn’t get a boost from supply constraints.
With its focus on student housing, American Campus Communities can continue to grow for many years as long as it executes well.
It estimates its growth pipeline—meaning projects currently in development—is $1.5 billion, which translates into around 16,900 student beds.
Over the last decade the REIT has produced positive EPS growth. It has grown from 16 properties to more than 160, with average same-store net operating income growth of 4.3%.
Its strong balance sheet—with a debt-to equity ratio of only 41%—is another positive.
We expect American Campus Communities to continue to grow strongly in line with its past record and reward shareholders with rising payouts.
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