Is Holding Equity Residential Stock Still a Smart Move Now?

Core Viewpoint - Equity Residential (EQR) is positioned to benefit from its diversified portfolio in affluent markets, with strong demand for rental units and strategic enhancements aiding growth, despite challenges from elevated supply and high-interest expenses [1][10][11]. Group 1: Company Strengths - EQR focuses on affluent renter locations, which helps maintain stable revenue streams and allows for easier rent increases during economic growth, with an estimated 3% growth in total same-store revenues for 2024 [4]. - The company is leveraging technology and organizational capabilities to enhance rent growth and operational efficiency, projecting a 3.2% increase in same-store net operating income (NOI) for 2024 [5]. - EQR is actively repositioning its portfolio by selling older properties and acquiring newer ones in high-demand submarkets, having acquired 14 properties worth $1.26 billion in Q3 2024 and disposed of six properties for $365.5 million in the first nine months of 2024 [6]. Group 2: Financial Health - EQR maintains a healthy balance sheet with nearly $1.7 billion in liquidity as of September 30, 2024, and a well-laddered debt maturity schedule, ending Q3 2024 with a net debt to normalized EBITDAre ratio of 4.56x and an unencumbered NOI percentage of 89.7% [7]. - The company is committed to solid dividend payouts, with a projected compound annual growth rate of 6% for dividends from 2011 to 2024, supported by a 2.5% growth projection in normalized funds from operations (FFO) per share for 2024 [9]. Group 3: Challenges - The elevated supply of residential rental units in some markets poses a challenge to EQR's rent growth momentum [10]. - High-interest rates continue to be a concern, with total debt at approximately $8.37 billion as of September 30, 2024, and estimated interest expenses expected to rise by 5.7% in 2024 [11].