UMH Properties generated $20.4 million in third-quarter funds from operations (FFO) after paying $5.3 million in preferred dividends. Its Series D preferred shares currently yield about 7.58% at the share price cited, with an ex-dividend yield of roughly 7.7%. The cumulative preferred stock is backed by the company’s real estate portfolio, but its income profile should be considered alongside borrowing costs, debt levels and dividend coverage.
145 manufactured-home communities underpin the business
UMH Properties is a real estate investment trust (REIT) that operates 145 manufactured-home communities across 12 U.S. states. The company owns 142 of those communities. They contain more than 27,000 developed homesites, about 11,400 of which have rental homes leased to residents.
Third-quarter adjusted EBITDA was nearly $36 million, up about 7% from a year earlier. EBITDA excludes interest expense, however, making FFO a more relevant measure of how higher financing costs affect operating performance.
FFO growth helps offset higher borrowing costs
UMH said the average coupon on its older debt is in the upper 4% range, while the cost of recent refinancings has reached the low 6% range. Borrowings under its existing credit facility cost in the low 5% range. Management plans to use that facility before considering common- or preferred-stock issuance.
Higher rental income has so far been sufficient to offset the effect of rising interest expense. Third-quarter FFO came to $20.4 million, or $0.24 per share, after $5.3 million in preferred dividends. Before those dividends, FFO was close to $26 million, with roughly one-fifth going toward preferred payouts. UMH continues to expect FFO of about $1 per share for the current fiscal year.
Debt and balance-sheet composition
At the end of the third quarter, UMH reported about $880 million in book equity, including approximately $340 million in preferred equity and more than $500 million in common equity. Total debt was close to $860 million, of which $543 million was mortgage debt.
Assets included nearly $100 million in cash, investments in joint ventures and marketable securities, as well as just over $160 million in inventory and notes receivable. Real estate had a book value of about $1.4 billion, with nearly $600 million in accumulated depreciation. These figures provide context on the portfolio but do not establish what the properties could fetch in a sale.
Series D dividends are cumulative
UMH has one preferred series outstanding: Series D, trading under the ticker UMH.PR.D. It carries a 6.375% stated dividend rate, paid quarterly in four instalments of just under $0.40 per share. Because the shares trade below their $25 par value, the current yield is about 7.58%; the ex-dividend yield is roughly 7.7%. The next ex-dividend date is expected to be November 16.
Series D dividends are cumulative. If UMH suspends payments, unpaid dividends do not disappear and must be made up later. That provision does not guarantee timely payment, so cash flow, financing arrangements and the company’s ability to meet its obligations remain relevant considerations.
UMH is also issuing Series D shares through an at-the-market offering. In the first nine months of this year, the company sold 664,000 shares at an average price of $21.73, raising gross proceeds of $14.4 million. The offering provides additional capital but also expands the preferred-share base and the associated future dividend obligations.
Preferred income and common-stock valuation differ
Consensus estimates imply a forward FFO multiple of about 13 to 13.5 times for UMH’s common stock. The preferred shares instead offer a fixed stated dividend and cumulative terms, so their return profile is distinct from the common stock’s valuation. Those features do not remove interest-rate, credit or liquidity risks. Third-quarter FFO, the balance sheet and ongoing preferred issuance are among the company-specific figures relevant to assessing the securities.