Published on April 9th, 2025 by Felix Martinez
Flagship Communities Real Estate Investment Trust (MHCUF) has two appealing investment characteristics:
#1: It is a REIT so it has a favorable tax structure and pays out the majority of its earnings as dividends.
Related: List of publicly traded REITs
#2: It pays dividends monthly instead of quarterly.
Related: List of monthly dividend stocks
You can download our full Excel spreadsheet of all 76 monthly dividend stocks (along with metrics that matter, like dividend yield and payout ratio) by clicking on the link below:
Flagship Communities REIT’s combination of favorable tax status as a REIT and a monthly dividend make it appealing to individual investors.
But there is more to the company than just these two factors. Keep reading this article to learn more about Flagship Communities REIT.
Business Overview
Flagship Communities REIT is one of the Midwest region’s most prominent developers of residential manufactured housing communities. Its communities are located throughout Kentucky, Ohio, Indiana, Tennessee, Arkansas, Illinois, and Missouri. With 28 years of experience developing and managing manufactured housing communities, Flagship has developed expertise in real estate, financing, and community management.
The manufactured housing industry has generated consistent performance over the last 25 years.
Source: Investor Presentation
Flagship Communities REIT reported solid growth in both Q4 and full-year 2024. Q4 rental revenue rose 26.6% to $23.8 million, with same-community revenue up 15.5%. Net income surged to $25.2 million from a $1.5 million loss a year earlier. Funds from operations (FFO) per unit increased 30.6% to $0.384, while adjusted funds from operations (AFFO) per unit rose 45.3% to $0.375. Same-community NOI margin improved to 68.8%.
For the full year, rental revenue grew 24% to $88.1 million, and net income jumped 59% to $103.5 million. FFO per unit was $1.29, up 8.9%, and AFFO per unit reached $1.167, a 12.4% increase. Same-community occupancy remained stable at 84.8%. Flagship ended the year with a net asset value (NAV) of $670.8 million and reduced its debt-to-gross book value to 38.1%.
Operationally, Flagship expanded its portfolio with seven new communities and added 112 lots, with the potential for 638 more in coming years. Post year-end, it refinanced $45 million of debt with two new 10-year, interest-only loans. Flagship remains well-positioned for future growth with $14.3 million in liquidity and no major debt maturities until 2030.
Thanks to its solid business model, Flagship Communities REIT has enjoyed consistent rent and occupancy growth in recent years.
Source: Investor Presentation
Growth Prospects
Flagship Communities REIT has three growth drivers in place. It tries to grow its funds from operations (FFO) per unit by raising its rental rates every year, increasing its occupancy rate, and reducing its operating expenses.
Flagship Communities REIT added seven communities and 112 lots to its asset portfolio during 2024. It thus grew its revenue, net operating income, and FFO over the prior year.
It is also worth noting that Flagship Communities REIT operates in a highly fragmented market with great opportunities for consolidation. The top 50 investors are estimated to control about 17% of manufactured housing lots for rent. Therefore, there is ample room for future growth.
Given the solid business model of Flagship Communities REIT but also the sensitivity of its results to the gyrations of the exchange rate between the Canadian dollar and the USD, we expect the REIT to grow its FFO per unit by about 2.0% per year on average over the next five years.
Dividend & Valuation Analysis
Flagship Communities REIT currently offers a dividend yield of only 3.8%. In fact, most REIT unitholders own stakes in these companies primarily because of their attractive dividends. Therefore, the dividend yield of Flagship Communities REIT is likely to render this stock suitable for most investors.
Investors should also be aware that Flagship Communities REIT’s dividend may fluctuate significantly over time due to the fluctuation of the exchange rates between the Canadian dollar and the USD.
Flagship Communities REIT’s dividend yield has resulted primarily from the company’s exceptionally low payout ratio, currently at 45%. The trust could offer a more generous dividend to its unitholders, but it prefers to preserve funds for acquiring and developing new properties.
We also note that Flagship Communities REIT has a material debt load on its balance sheet. Its net debt is currently $299 million, which is 78% of the stock’s market capitalization.
Considering the 3.8% dividend and assuming that Flagship Communities REIT will grow its FFO per unit by 2.0% per year on average over the next five years, the stock could offer a 5.8% average annual total return over the next five years. This is an unattractive expected return; hence, we recommend waiting for a much lower entry point before purchasing the stock.
Final Thoughts
Flagship Communities REIT has a solid business model and ample room for future growth. However, the stock offers a dividend yield of 3.8%. While Flagship Communities REIT seems to have promising growth prospects thanks to the highly fragmented structure of its markets, the stock seems fully valued right now. Therefore, investors should wait for a significant correction before purchasing it.
Moreover, Flagship Communities REIT is characterized by extremely low trading volume. This means that it is hard to establish or sell a large position in this stock.
Don’t miss the resources below for more monthly dividend stock investing research.
- The Monthly Dividend Stocks List
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And see the resources below for more compelling investment ideas for dividend growth stocks and/or high-yield investment securities.
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- Blue Chip Stock: Kings, Aristocrats, and Achievers
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- BDCs: List of BDCs and more