Analyzing Preferred Apartment Communities (APTS) and UDR (UDR)

Preferred Apartment Communities (NYSE: APTS) and UDR (NYSE:UDR) are both finance companies, but which is the better business? We will contrast the two companies based on the strength of their valuation, earnings, analyst recommendations, institutional ownership, dividends, profitability and risk.

Institutional & Insider Ownership

51.4% of Preferred Apartment Communities shares are owned by institutional investors. Comparatively, 96.7% of UDR shares are owned by institutional investors. 3.1% of Preferred Apartment Communities shares are owned by company insiders. Comparatively, 3.1% of UDR shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Dividends

Preferred Apartment Communities pays an annual dividend of $1.00 per share and has a dividend yield of 6.3%. UDR pays an annual dividend of $1.24 per share and has a dividend yield of 3.5%. Preferred Apartment Communities pays out -99.0% of its earnings in the form of a dividend. UDR pays out 117.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Preferred Apartment Communities has raised its dividend for 2 consecutive years and UDR has raised its dividend for 8 consecutive years. Preferred Apartment Communities is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Preferred Apartment Communities and UDR’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Preferred Apartment Communities 10.49% 2.78% 1.08%
UDR 29.41% 10.18% 3.85%

Valuation and Earnings

This table compares Preferred Apartment Communities and UDR’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Preferred Apartment Communities $200.12 million 3.04 -$9.53 million ($1.01) -15.60
UDR $959.86 million 9.82 $292.71 million $1.06 33.21

UDR has higher revenue and earnings than Preferred Apartment Communities. Preferred Apartment Communities is trading at a lower price-to-earnings ratio than UDR, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Preferred Apartment Communities and UDR, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Preferred Apartment Communities 0 3 2 0 2.40
UDR 1 10 3 0 2.14

Preferred Apartment Communities currently has a consensus target price of $19.80, suggesting a potential upside of 25.63%. UDR has a consensus target price of $39.36, suggesting a potential upside of 11.83%. Given Preferred Apartment Communities’ stronger consensus rating and higher possible upside, equities analysts plainly believe Preferred Apartment Communities is more favorable than UDR.

Summary

UDR beats Preferred Apartment Communities on 11 of the 16 factors compared between the two stocks.

Preferred Apartment Communities Company Profile

Preferred Apartment Communities, Inc. is a real estate investment trust (REIT). The Company is formed to acquire and operate multifamily properties in select targeted markets throughout the United States. It operates through segments, including multifamily communities, real estate related financing, new market properties and office buildings. The multifamily communities segment consists of its portfolio of owned residential multifamily communities. The real estate related financing segment consists of the Company’s portfolio of real estate loans, bridge loans, and other instruments deployed by it to partially finance the development, construction, and prestabilization carrying costs of new multifamily communities and other real estate and real estate related assets. The new market properties segment consists of its portfolio of grocery-anchored shopping centers. The office buildings segment consists of its office buildings located in Atlanta, Georgia and Birmingham, Alabama and Texas.

UDR Company Profile

UDR, Inc. is a self-administered real estate investment trust. The Company owns, operates, acquires, renovates, develops, redevelops, disposes of and manages multifamily apartment communities generally located in various markets across the United States. The Company’s segments are Same-Store Communities and Non-Mature Communities/Other. As of December 31, 2016, the Company’s consolidated real estate portfolio included 127 communities located in 18 markets, with a total of 39,454 completed apartment homes. As of December 31, 2016, the Company also had an ownership interest in 27 communities containing 6,849 apartment homes through unconsolidated joint ventures or partnerships. As of December 31, 2016, the Company’s properties were in various locations, such as Orange County, San Francisco and Los Angeles in California; Seattle, Washington; Richmond, Virginia; Baltimore, Maryland; Orlando and Tampa in Florida; Nashville, Tennessee, and Dallas and Austin in Texas.

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