Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Sun Communities, an Attractively Priced RV REIT


This real estate investment trust is successfully playing the growing trend of traveling the country by recreational vehicle.

Sun Communities (SUI), a real estate investment trust, is one of the largest owners of manufactured housing and recreation vehicles communities, with 162 communities, mostly in the Midwest and southeast US.

With a rich yield of close to 6%, well above the average 3% for its REIT peers, Sun is attractively priced for new money.

The trust has paid $0.63 per share since 2005. That annualizes to $2.52 per share, for a yield of 5.8%. For the last few years, about 75% of the distribution was return of capital, which is not taxable in the year received, but reduces your cost base when sold.

The balance was taxable as ordinary income. Given the large portion of nontaxable return of capital, the shares are appropriate for a taxable account.

About 80% of revenue comes from property rentals. Sun leases mobile home lots on a monthly or annual basis, generally adjusting the rates in line with the going market rate.

Sun's communities are not what you might imagine when you think of a trailer park. They are residential communities with paved streets and may have amenities such as a clubhouse, swimming pool, and tennis courts.

Its business continues to benefit from a weak housing market. As new home sales fell in March by the largest amount in more than a year, demand for Sun's low-cost housing remained strong.

Funds from operations (or FFO) per share rose nearly 9% to $0.89 in the first quarter of 2012, from $0.82 a year ago, despite a 12% increase in outstanding shares due to an equity issue in January.

These strong results and continued weakness in the housing market have led analysts to raise their estimates of FFO per share by $0.02 to $3.26 in 2012, and by a penny to $3.52 in 2013, up from $3.13 last year.

At 14 times FFO of $3.07 per share for the trailing 12 months, the shares are trading at a discount to an average 21 times for residential REIT peers and represent good value.

Editor's Note: This article was written by Carla Pasternak of High-Yield Investing.

Below, find some more great investing and trading content from MoneyShow:

A Smart Way Back into Real Estate
By Stephen Leeb

A Canadian REIT Back on Track
By the Staff of Investor's Digest

Buy This REIT Now, While It's Uncool
By Bryan Perry

3 REITs Down, One to Go...Up
By Steve Mauzy

Twitter: @TopProsTopPicks
< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos