Annual Performance Review of Preferred Apartment Communities, Inc. 2016

APTS 110215 11.11 Yld 6.93 PE 14.18 MP 65

Returns Since November 2015

APTS - 24.57%     APTS with "Divi-X" - 34.78%

Welcome to our very first 'Play of the Week' Annual Review since we started this web site a year ago.  My initial intention was to post a new 'Play of the Week' every week for fifty-two weeks, and even though this is not a stock picking web site, I at least try to post articles about reasonably priced securities; which in my opinion have been few and far between this past year.

The whole purpose of the 'Play of the Week' Annual Reviews is to show readers the long-term success of the "Divi-X" System compared to not using the "Divi-X" System.  So, without further delay, let's jump into our Annual Review of Preferred Apartment Communities, our first 'Play of the Week' chosen in November of 2015.

Company Profile

Preferred Apartment Communities, Inc. is a real estate investment trust (REIT). The Company is formed primarily to acquire and operate multifamily properties in select-targeted markets throughout the United States. It operates through three segments: multifamily communities, retail and real estate related financing. The multifamily communities segment consists of owned residential multifamily communities. It owns approximately 20 multifamily communities with a total of over 6,140 units in over eight states. The retail segment consists of owned grocery-anchored shopping centers. The Company owns over 31 grocery-anchored centers across over seven Sunbelt states. It owns Champions Village, a Randalls-anchored shopping center. The financing segment consists of a portfolio of real estate loans, bridge loans and other financial instruments, which partially finance the development, construction and prestabilization carrying costs of multifamily communities and other real estate assets. (Source:  Google Finance)


The Dividend Times: An Introduction to The "Divi-X" System

The Last Year

The Leverage Projection Worksheet

APTS Leverage Projection Worksheet

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When I initiated coverage on APTS, the price was only $11.11 a share with a dividend rate of $.1925/qtr. which equated to a dividend yield of 6.93%.  Assuming a $10,000 investment with a very modest "Multiplier  Pick" of 65, our yield was then able to afford us 541.01 additional shares giving us a grand total share count of 1441.0950.  Using a "Multiplier Pick" of 65 leveraged us at only 37.54%. 

Returns To Date

APTS Percentage Return 2016

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A few things to note about this chart:

  1. Right out of the gate, going back to Dec. 2015, you can see that "Divi-X" took a commanding lead over 'All Cash' of 10.62%.
  2. Our "Divi-X" lead widened to over 20% back in July of 2016 but has since retreated and once again, "Divi-X" continues to lead over 10% above 'All Cash.'

Translation in Dollars

APTS Return Scenario 2016

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Back in July of 2016, our "Divi-X" dollar advantage over 'All Cash' widened to a very attractive $2,010.25 ($15,862.63 less $13,852.38), however, since the pullback, "Divi-X" still holds an impressive $1,020.29 advantage over 'All Cash.'  That's in addition to the already decent return of $2,457.24 provided by 'All Cash' alone.

Dividend Yields

Now, for a look at our dividend picture.

APTS 20YR Dividend Yields

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A few things to note about this chart:

  1. Our "Divi-X" Yield on Cost was very close to the 'All Cash' Yield on Cost in 2016.
  2. In 2017, whether there is another dividend increase or not, our "Divi-X" yield will exceed the 'All Cash' yield by 0.05%.  That is actually quite remarkable for only the second year.
  3. The management at APTS has committed to an annual 10% dividend increase for the foreseeable future.  If this holds true, you can expect our "Divi-X" yield to exceed the 'All Cash' yield by leaps and bounds and that is not an exaggeration.  The 'Proj "Divi-X" Yield' shown in purple gives you an idea of what that might look like.

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Running Leverage Rate

The "Divi-X" System Workbook monitors one's 'Running Leverage Rate' to keep the user aware of if and when a deteriorating share price increases an investor's risk level beyond their acceptable risk tolerance level.

APTS Running Leverage Rate

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A few things to note about this chart:

  1. Our initial leverage position started at 37.54%.
  2. Because the share price popped a bit immediately after buying at $11.11, you see an immediate dip in the 'Running Leverage Rate' or 'Levered Percentage' to 31.69% from 37.54%.  That's because the increase in market value reduced the percentage ratio of debt to market value.
  3. As of November 2016, our 'Running Leverage Rate' stood at 29.75%.  A decrease of 7.79% from where we started at a year ago.  At first glance, that may not seem significant, and you would be right.  In the absence of a meteoric increase in share price, you'll seldom see aggressive declines in the 'Running Leverage Rate' in the first couple of years because your loans are front-end weighted with interest.  In other words, early in a loan, most of your payments go towards interest.  But APTS is definitely going in the direction we want to see.


Taking a New Position

This is the part of the article where we forecast a new position, but in our 'Play of the Week' Annual Reviews, we are not doing that.  So instead, we're simply going to look at the 'Leverage Summary' results and our forecast for the remaining four of our five year projections.

APTS Leverage Summary

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Our first year is already gone and I think you'll have to agree that "Divi-X" did not disappoint.  As you can see from the chart above, "Divi-X" took our preferences from last year (PmtPerc, Multiplier Pick, and Expected Return, etc.), showed us what we expected, and up till now, has even beaten that by 14.24%!  Because we are currently beating our expectations, you can see that cushion carry over to the remaining four years.  If nothing else, it does provide a 14.24% cushion towards future performance.

Return Scenarios

Next we'll take a look at the minimum milestones we would hope to achieve over the next few years along with a recap of what we've accomplished so far.

APTS Percentage Return 2016

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Don't be discouraged if the expectations do not seem that impressive.  You can always raise or lower that figure to your liking if you're using "The "Divi-X" System Workbook."  Also, keep in mind, that these are based on expectations, and in your case, your expectations.  Actual results will vary.


And finally, our dividend picture:

APTS 20YR Dividend Yields

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Remember, absolutely nothing has to happen for "Divi-X" to surpass 'All Cash' in yield next year.  In the following years, if management can live up to their own expectations and maintain their dividend policy of 10% increases a year, than our "Divi-X" yield could easily dwarf 'All Cash' in the near future.  Right now, only a dividend cut could delay that.  In the absence of a dividend cut/hike and APTS's dividend remained stagnant, you can already see how 'Divi-X" would fare compared to 'All Cash' by comparing the red and green bars in the chart above.


So far, "Divi-X" has been kind, but will our good fortune continue?  We'll see when we revisit APTS again next year.  Till then, many happy returns!


Authored by Lee Carroll Wentker

All screen captures are taken from 'The "Divi-X" System Workbook'

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The security showcased here is for learning purposes only. It is not a recommendation or an endorsement of any kind. Do your own due diligence before making any investment.

All work is copyrighted by The Dividend Times, LLC 2015 - 2016



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