NexPoint Residential Trust Offers 3.6% Dividend Yield, Double-Digit Percentage One-Year Total Return (NXRT)
By: Ned Piplovic,
NexPoint Residential Trust, Inc. (NYSE: NXRT) currently offers a 3.6% dividend yield and has raised its annual distribution every year since the company’s inception in 2015.
In addition, NXRT’s share price has almost doubled over the past two years, which gave the company shareholders a double-digit-percentage total return for the past year and a triple-digit total return over the past three years.
Investors who are interested in adding this equity to their portfolio should consider acting before the next ex-dividend date on June 14, 2018. The next dividend distribution to all eligible shareholders will occur on the June 29, 2018 pay date.
NexPoint Residential Trust, Inc. (NYSE:NXRT)
NexPoint Residential Trust, Inc. is a real estate investment trust (REIT) with a primary focus on acquiring, owning and operating middle-income multi-family properties in major metropolitan areas. The REIT started trading as an independent public company following a spin-off from the NexPoint Credit Strategies Fund (NHF) on April 1, 2015.
NXRT seeks to acquire and manage residential properties in the southeastern and southwestern United States. Currently, Texas and Georgia — specifically the Dallas (26.5%), Atlanta (20%) and Houston (10%) metropolitan areas — contribute more than half of the company’s net operating income (NOI). Nashville (8.8%) and Orlando (8.6%) round out the top five markets. As of the end of the first quarter of 2018, the company had completed interior renovations on more than 4,500 units and achieved an average rent premium increase of nearly 11% over the prior lease rate, which corresponds to a 21% return on investment. Same-store revenue rose 3.6% and NOI increased 5.9% in the first quarter of 2018. NexPoint Real Estate Advisors, L.P. — an affiliate of Highland Capital Management, L.P. — serves as an external advisor to the NexPoint Residential Trust
NexPoint’s current quarterly dividend of $0.25 per share is 13.6% higher than the $0.22 dividend payout from the same period last year. This new quarterly distribution amount translates to a $1 annualized dividend for 2018 and a 3.6% forward dividend yield. The REIT’s current yield outperforms the 3.1% average yield of the entire Financials sector by 16% and is just slightly lower than the 3.87% simple average yield of all the companies in the Real Estate Development industry segment.
Since initiating dividend distributions three years ago, the REIT has enhanced its total annual dividend amount by 21%, and NexPoint has hiked the quarterly dividend amount in the last quarter of the past two years. As a result, shareholders should expect the company to follow the same pattern and offer another quarterly dividend hike in December 2018. An additional increase to the quarterly dividend payout would help to maintain the current yield level, or, at the very least, help minimize the yield’s deterioration if the share price continues ascending at its current pace.
NXRT’s share price experienced moderate volatility over the past 12 months, but this was unusual for the stock as its long-term trend has been a steep and relatively stable rise since the beginning of 2016. The stock declined almost 10% between the onset of the trailing 12 months and the 52-week low of $22.84 on August 18, 2017. After bottoming out at the end of August, the share price spiked nearly 30% to its 52-week high of $29.40 on December 18, 2017.
However, NXRT once again dropped precipitously, giving back nearly all its recent gains by mid-February 2018 and falling to within a few percent of the August 2017 low. Since mid-February, the share price has again risen strongly and is within striking distance of its all-time high. NXRT closed on June 5, 2018 at $27.84, which is just slightly more than 5% below the November 2017 peak price.
Despite the volatility of the past year, the company’s general upward trend and continued dividend payments gave shareholders a 14% total return. Over the past three years, the rapid price ascension of the REIT, combined with rising dividend payments, have given shareholders an impressive total return of over 110%.
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