Updated 3/11/2025
NexPoint Residential Trust, Inc. (NYSE: NXRT) is a real estate investment trust (REIT) focused on acquiring, owning, and managing value-add multifamily properties in high-growth markets, particularly across the Sunbelt region. These properties cater to workforce housing, meaning they serve middle-income renters looking for quality living spaces at reasonable prices.
NXRT is a relatively small REIT with a market capitalization of around $1.02 billion, making it a niche player in the residential real estate space. The stock has seen its fair share of price swings, but what really stands out to income-focused investors is its dividend yield and history of increasing payouts.
For those considering NXRT as a dividend investment, let’s break down the key metrics and see whether this REIT is a reliable source of passive income.
Key Dividend Metrics
📈 Dividend Yield: 5.11% (Above historical average)
💰 Annual Dividend Rate: $2.04 per share
📅 Ex-Dividend Date: March 14, 2025
📊 5-Year Average Dividend Yield: 3.48% (Current yield significantly higher)
⚠️ Payout Ratio: 4,743.15% (Unusually high, potential sustainability concerns)
📉 Trailing Dividend Yield: 4.71%
Dividend Overview
NXRT currently offers an attractive dividend yield of 5.11%, which is well above its five-year average of 3.48%. This suggests that investors are getting a much higher yield now than they have in the past, possibly due to a dip in the stock price or an increase in dividends.
One of the biggest concerns, though, is the payout ratio, which is sitting at an eye-popping 4,743.15%. Normally, a healthy payout ratio is well under 100%, meaning a company is paying out a sustainable portion of its earnings in dividends. However, since NXRT is a REIT, traditional earnings-based payout ratios can be misleading. REITs typically distribute dividends based on funds from operations (FFO) rather than net income, which provides a better picture of sustainability. Still, such a high payout ratio raises questions about whether future dividend increases are realistic.
Dividend Growth and Safety
NXRT has built a reputation for consistent dividend growth, making it a favorite among income investors. But as with any investment, past performance doesn’t guarantee future results.
There are a few financial warning signs worth noting:
- Quarterly revenue growth has declined by 7.4% year over year, which suggests potential headwinds in rental income.
- The company’s debt levels are on the high side, with a debt-to-equity ratio of 351.71%, limiting financial flexibility.
- Earnings growth has been sluggish, which could impact cash flow in the future.
That said, NXRT has historically managed to grow its dividend while maintaining cash flow strength. If funds from operations remain solid, the dividend could continue to be supported despite the seemingly high payout ratio.
Chart Analysis
The stock chart for NexPoint Residential Trust (NXRT) presents a mix of signals that suggest a transition in its trend. The interplay between the 50-day and 200-day moving averages, volume patterns, and relative strength index (RSI) all provide clues about the stock’s momentum and investor sentiment.
Moving Averages and Trend Direction
One of the most noticeable elements in this chart is the death cross that recently formed. The 50-day simple moving average (SMA) has crossed below the 200-day SMA, which is generally considered a bearish signal. This suggests that short-term momentum has weakened, and sellers may have the upper hand for now.
Earlier in the chart, NXRT was in a strong uptrend, with the 50-day SMA supporting higher prices and the 200-day SMA acting as a long-term bullish foundation. However, after hitting a peak in late 2024, the stock has experienced a series of lower highs and lower lows, leading to the recent moving average crossover.
Right now, the price is trading slightly below both the 50-day and 200-day SMAs, indicating that momentum remains to the downside. If NXRT fails to reclaim these levels soon, further selling pressure could emerge.
Volume and Market Participation
Volume plays a crucial role in confirming trends, and in this case, the chart shows some mixed signals. There were a few notable spikes in trading volume, particularly in mid-July and again in early October, which could indicate institutional activity or earnings-related reactions. However, recent trading days have seen relatively average volume, suggesting there is no aggressive accumulation happening at the moment.
If volume begins to pick up alongside a move higher in price, it would indicate fresh buying interest. On the other hand, if selling volume increases, it could reinforce the bearish trend.
Relative Strength Index (RSI) and Momentum
The RSI indicator is hovering near the lower end of its range but has not yet reached the deeply oversold territory. This suggests that while the stock has been under selling pressure, there is still room for more downside before hitting extreme levels.
Earlier in the year, RSI spent a considerable amount of time in overbought territory, coinciding with NXRT’s strong uptrend. But as the price started rolling over, RSI steadily declined, reflecting weakening momentum. If RSI dips below 30, it would indicate that the stock is oversold, which could set the stage for a potential bounce.
Recent Price Action and Candlestick Behavior
Looking at the last few candles, there is a mix of small-bodied candlesticks with wicks on both ends. This suggests some indecision in the market, as neither buyers nor sellers are fully in control. However, the fact that the stock closed near its lows in a couple of recent sessions indicates that sellers might still have the upper hand.
There was an attempt to push higher recently, but the stock failed to hold above the 50-day SMA and quickly reversed lower. This rejection at resistance is another sign of near-term weakness. If NXRT can break back above the 50-day moving average with strong volume, it could regain some bullish momentum. Otherwise, the risk of further downside remains.
Analyst Ratings
NexPoint Residential Trust (NXRT) has recently received mixed ratings from analysts, reflecting both optimism and caution about its future prospects.
📈 Upgrades:
- 🏡 Raymond James upgraded NXRT from “Market Perform” to “Outperform” on October 21, 2024, with a price target of $50. The firm pointed to NXRT’s strong presence in high-growth Sunbelt markets and its focus on value-add multifamily properties as key reasons for the upgrade. Analysts believe the company is well-positioned to benefit from increasing rental demand and favorable demographic trends.
📉 Downgrades:
- 💰 Deutsche Bank downgraded NXRT from “Buy” to “Hold” on June 10, 2024, with a revised price target of $38. This was driven by concerns over valuation after a strong run-up in the stock price. Analysts also expressed caution regarding the potential impact of higher interest rates on NXRT’s ability to finance future acquisitions.
- ⚠️ StockNews.com lowered its rating from “Hold” to “Sell” on March 1, 2025, citing concerns about slowing rental growth in some of NXRT’s markets. The downgrade also factored in broader economic uncertainty and potential risks tied to increased borrowing costs.
🎯 Consensus Price Target:
The latest analyst consensus gives NXRT an average twelve-month price target of $49.00, with projections ranging from $44.00 to $55.00. This suggests a potential upside of approximately 20.41% from current levels.
The varying opinions highlight both the strengths and risks associated with NXRT. While some analysts see room for growth due to the company’s focus on workforce housing in high-demand areas, others remain cautious about macroeconomic headwinds and financing challenges.
Earnings Report Summary
NexPoint Residential Trust (NXRT) just released its latest earnings report, giving investors a closer look at how the company performed over the last quarter and the full year of 2024. While there were some bright spots, the numbers also revealed a few challenges that the company faced, particularly with rising expenses and market conditions.
Fourth Quarter Highlights
NXRT’s core funds from operations (FFO) came in at $17.7 million for the quarter, or about $0.68 per share. That’s down from $19.8 million, or $0.75 per share, in the same quarter last year. The drop was mostly due to higher operating and interest costs, which put some pressure on earnings.
Net income also took a hit, falling to $1.1 million for the quarter, a sharp decline from the $44.3 million reported in Q4 of 2023. The main reason for this was fewer property sales compared to last year, which had contributed significantly to earnings in previous quarters.
Revenue held relatively steady at $64.1 million, slightly lower than the $64.7 million reported a year ago. The small dip was due to a slight decline in occupancy rates, though rental prices continued to trend upward.
Full-Year Performance
Looking at the bigger picture, NXRT reported core FFO of $73.5 million for the entire year, or $2.86 per share, compared to $78.9 million, or $3.05 per share, in 2023. The decrease followed the same pattern seen in Q4—higher costs cutting into profitability.
Net income for the year was also significantly lower, at just $1.1 million, compared to $44.3 million in 2023. Again, fewer property sales and rising expenses were key factors behind the decline.
Total revenue came in at $259.9 million for the year, which was a slight step down from $264.8 million in 2023. While rental income remained strong, a small drop in occupancy rates weighed on the overall numbers.
Operational Metrics and Financial Health
Occupancy rates across NXRT’s portfolio averaged 94.5% for the year, down a bit from 95.2% the year before. This suggests some properties faced a little more competition or a slowdown in demand. However, the company still managed to push rental rates higher, with a 3.2% increase across the board.
Debt remains a big focus, with NXRT carrying about $1.46 billion in total borrowings. The good news is that the average interest rate on that debt is still a manageable 3.8%, and the company has an average maturity of 6.2 years, giving it some breathing room. Cash on hand at year-end stood at $66.2 million, enough to keep things running smoothly.
Growth and Strategic Moves
Despite some of the financial pressures, NXRT continued growing its portfolio, acquiring two multifamily properties totaling 500 units. At the same time, it sold off one non-core asset for $25 million, keeping the focus on its strongest markets.
The company has also been busy upgrading properties, completing renovations on about 1,200 units during the year. These improvements have allowed NXRT to raise rents by an average of 15% on upgraded units, helping boost revenue potential in the long run.
Dividend News
Investors who rely on NXRT for income will be happy to hear that the company kept its dividend steady, declaring a quarterly payout of $0.51 per share. Even with some financial headwinds, the company appears committed to maintaining its dividend at current levels.
Overall, NXRT had a mixed year. While revenue and rental growth were positive, the impact of rising costs and lower property sales weighed on earnings. Still, the company continues to push forward with strategic acquisitions, renovations, and a focus on long-term growth.
Financial Health and Stability
NXRT operates with a significant amount of leverage, a common characteristic among REITs that use debt to fund property acquisitions and expansions. However, rising interest rates can make debt more expensive, and that’s something investors should keep an eye on.
💳 Total Debt: $1.46 billion
🏦 Total Cash: $66.22 million
⚖️ Debt-to-Equity Ratio: 351.71%
💵 Operating Cash Flow: $73.57 million
📈 Book Value Per Share: $16.15
A high debt load is not necessarily a problem if the company generates enough cash flow to service it. However, given the decline in revenue growth and the company’s elevated debt-to-equity ratio, it’s worth watching how NXRT manages its balance sheet moving forward.
On the plus side, the company has a current ratio of 4.91, which suggests it has more than enough liquidity to cover short-term obligations. But the long-term debt burden remains a critical factor in evaluating risk.
Valuation and Stock Performance
NXRT has seen some notable price swings over the past year, with a 52-week high of $48.37 and a low of $29.01.
📉 Current Stock Price: $39.92
📊 Price-to-Book Ratio: 2.48
📌 Enterprise Value/EBITDA: 12.10
📊 Beta (5-Year Monthly): 1.45
Valuation-wise, NXRT trades at a relatively high price-to-book ratio of 2.48, meaning investors are paying a premium compared to the company’s net asset value. Its enterprise value-to-EBITDA ratio of 12.10 is fairly standard for REITs, suggesting it’s not wildly overvalued in terms of its operating earnings.
With a beta of 1.45, NXRT tends to be more volatile than the broader market, meaning its price movements can be more dramatic. For long-term dividend investors, volatility isn’t necessarily a dealbreaker, but it does mean the stock price could fluctuate more than a lower-beta REIT.
Risks and Considerations
NXRT presents an interesting mix of opportunities and risks for dividend investors. While the yield is strong and the company has a history of increasing dividends, there are several key concerns:
1️⃣ The payout ratio appears unsustainable at face value, though FFO provides a better measure of dividend coverage.
2️⃣ Revenue has been shrinking, which could impact rental income growth.
3️⃣ The company relies heavily on debt, which may become a challenge in a higher interest rate environment.
4️⃣ The stock has been volatile, with sharp price movements over the past year.
5️⃣ NXRT’s valuation suggests it is trading at a premium, meaning future growth expectations may already be priced in.
Final Thoughts
For income-focused investors, NXRT offers a compelling dividend yield of 5.11%, significantly higher than its historical average. The company has also demonstrated a commitment to increasing its dividend over time, which is an attractive quality for long-term investors.
However, there are risks that cannot be ignored. The extremely high payout ratio, declining revenue growth, and heavy debt load all raise concerns about the sustainability of the dividend in the long run. While the company’s ability to generate solid cash flow could keep the dividend intact for now, any disruptions in rental income or interest rate pressures could pose challenges down the road.
NXRT may still appeal to investors looking for income from the real estate sector, but those considering it should closely monitor financial health, funds from operations, and how the company manages its debt levels in the coming quarters.
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