1 Top Dividend Stock to Buy for 2025 and Beyond

Mid-America Apartment Communities (NYSE: MAA) has a solid record of paying dividends. The real estate investment trust (REIT), which is focused on owning apartments in the U.S. Sun Belt region, has never suspended or reduced its payout in its 30 years as a public company. The landlord has routinely raised its dividend over the years, including the last 14 in a row.

The residential REIT currently offers a dividend yield of over 3.5%. That's about triple the yield of the S&P 500, which is around a 20-year low of 1.2%. In addition to that attractive income stream, MAA expects 2025 to begin a new multi-year growth cycle for its business. That makes it a great dividend stock to buy for the coming year and beyond.

Headwinds shifting to tailwinds

Lower interest rates following the pandemic's height fueled an apartment building boom across the Southeast, which has benefited from continued population and job growth. As a result, the supply of available apartments has surged, which has weighed on rent growth. For example, MAA's average rent per unit was down 0.4% during the third quarter.

However, higher interest rates over the past couple of years have made it much more expensive for companies to start new apartment development projects. Because of that, new supply has now peaked and is steadily getting absorbed by the market, thanks to the continued strong demand for rental housing.

These factors drive MAA's view that 2025 will mark a turning point in its business. CEO Eric Bolton stated in the Q3 earnings release: "We are confident that in calendar year 2025 we will see a meaningful decline in the amount of new supply impacting our portfolio, and we will enter a new multi-year cycle with demand outpacing supply."

MAA also expects demand for rental housing to continue growing in its markets. It sees population growth of 1.5% across its markets next year (faster than the 0.8% growth across the markets of its REIT peers), along with a higher job growth rate (1.3% versus 1%). People and companies continue to migrate to the southern half of the U.S. due to its warmer weather, lower costs, and better business climate.

Going on the offensive

While most other developers pulled back on starting new apartment projects as interest rates rose, MAA has been ramping up. The REIT currently has five communities in the lease-up phase that it developed or acquired in the past year (1,708 units at a $457.8 million cost). These projects should stabilize by early 2025, supplying it with incremental rental income.

On top of that, MAA has eight active development projects (2,762 units at a projected cost of $978.3 million). The REIT expects to complete these projects over the next few years, with stabilizations scheduled through the first quarter of 2028. They will provide the company with a growing stream of rental income over the next few years.

MAA expects to start three to four more development projects next year. It has the land and financial capacity to continue beginning new developments in the coming years.

The REIT is also investing capital to upgrade, reposition, and enhance its existing properties. For example, it expected to renovate 5,000 to 6,000 apartments last year. It also invests money to add amenities and technology to older properties. These investments make its communities more appealing to renters, enabling it to capture higher lease rates. Given the anticipated improvement in market conditions, MAA expects to increase the pace of these investments in 2025.

The landlord also expects to remain active in the transaction market in 2025. It was on track to make around $400 million in acquisitions last year, a pace it expects to maintain in the new year.

Poised for growth in 2025 and beyond

"The upside opportunity within our current portfolio from these changing market conditions, coupled with the growing contribution from our new development and acquisitions pipeline, has MAA very well positioned," noted Bolton in the Q3 earnings report. The REIT's earnings growth rate should reaccelerate, which should boost its stock price, especially considering that shares are currently down about 30% over the past three years.

In addition to that upside, MAA will likely continue to grow its high-yielding dividend. These factors set investors up to earn a strong total return in 2025 and beyond, making MAA a great dividend stock to buy as we head into the new year.

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Matt DiLallo has positions in Mid-America Apartment Communities. The Motley Fool has positions in and recommends Mid-America Apartment Communities. The Motley Fool has a disclosure policy.