Equity Residential EQR, which has a dominating presence in Boston, New York, Washington, D.C., Seattle, San Francisco and Southern California, is expanding into Denver, Atlanta, Dallas/Ft. Worth and Austin, and positioning itself to benefit from a more diversified portfolio. The company is also banking on technology, scale and organizational capabilities to drive growth.
Improving demand and limited resident turnover have helped sustain the occupancy level and driven rental rates higher, supporting same-store revenue growth in the first quarter of 2025. Moreover, per its investor update, physical occupancy remained strong and above the prior year in April and May.
Notably, the U.S. apartment market remained impressively resilient in the second quarter of 2025, absorbing more than 227,000 units between April and June, a robust second-quarter figure. This bodes well for Equity Residential. Elevated absorption suggests that the renter appetite for professionally managed apartments is holding firm despite broader macro uncertainty.
According to RealPage data, annual absorption surpassed even the peak leasing surge of 2021 and early 2022, defying a backdrop of slowing job growth, weak business sentiment and broader economic uncertainty. While rent growth stayed muted, up just 0.19% in June, occupancy climbed steadily. At 95.6% in June, national occupancy rose 140 basis points year over year.
Although shares of Equity Residential have declined 3.6% compared with the industry’s fall of 3.2% in the past six months, the stock currently carries a Zacks Rank #2 (Buy). Given its solid fundamentals, this decline offers a good entry point.
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Factors That Make Equity Residential a Solid Pick
Strategic Portfolio Positioning and Technology Initiatives: Equity Residential is targeting places where affluent renters prefer to live, work and play. In its strategy, the company is taking into consideration the hybrid working environment and the migration trends of affluent renters and opting for the acquisition and development of properties in suburban locations of its established markets and adding select new markets.
Moreover, given the high cost of homeownership, especially relative to rents, the transition from renter to homeowner is difficult in these markets, making renting apartment units a viable option. The company expects its total same-store revenues to grow year over year between 2.25% and 3.25% in 2025. We estimate the same to grow by 2.8%.
Equity Residential is also banking on technology and organizational capabilities to drive growth and improve the efficiency of its operating platform. Such efforts are likely to provide the company with a competitive edge over others and drive growth in net operating income (NOI) in the upcoming period. We estimate the same-store NOI to increase year over year by 2.2% for 2025.
Balance Sheet Strength: Equity Residential has a healthy balance sheet with ample liquidity and financial flexibility. As of March 31, 2025, the company had nearly $2.2 billion of liquidity. It has a well-laddered debt maturity schedule. It ended the first quarter of 2025 with a net debt to normalized EBITDAre of 4.21X. Unencumbered NOI as a percentage of the total NOI was 90.5% in the quarter. Further, an A-rated balance sheet renders the company access to the debt market at favorable rates.
With manageable debt maturities, solid credit metrics, significant unencumbered assets and sufficient access to capital markets at favorable rates, Equity Residential seems well-positioned to meet its future obligations as well as ride the growth curve.
Dividend Payout: Solid dividend payouts remain the biggest attraction for REIT investors and Equity Residential remains committed to this purpose. Over the last decade, the residential REIT has delivered strong dividend growth while maintaining a manageable Dividend Payout Ratio. Based on the latest dividend, per its May 2025 Investor Day presentation, for the 2011-2025 period, the company’s dividend witnessed a compound annual growth rate of 5.8%.
Given the company’s solid operating platform and balance sheet strength compared with industry counterparts, this dividend growth rate is expected to be sustainable over the long run.
Other Stocks to Consider
Some other top-ranked stocks from the residential REIT sector are Camden Property Trust CPT and American Homes 4 Rent AMH. Camden Property Trust and American Homes 4 Rent currently carry a Zacks Rank #2 each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Camden Property Trust’s current-year FFO per share has been raised marginally over the past two months to $6.82.
The Zacks Consensus Estimate for American Homes 4 Rent’s 2025 FFO per share has moved marginally northward over the past three months to $1.85.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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This article originally published on Zacks Investment Research (zacks.com).
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