Raymond James Downgrades NexPoint Residential Trust to Underperform
Raymond James has downgraded NexPoint Residential Trust (NYSE: NXRT) from Market Perform to Underperform, with no specific price target issued. The downgrade comes as part of a broader reassessment of the residential REIT sector, driven by what the firm describes as a “historic” reversal in multifamily housing demand.
Why the Rating Changed
The downgrade is rooted in Raymond James’ increasingly cautious outlook on the multifamily residential sector. The firm pointed to several converging headwinds that are pressuring demand fundamentals across the space:
- Softening labor market: Raymond James highlighted evidence of “a softening in the labor market, particularly among the younger, entry-level end of the market.” This demographic is a core renter cohort, and weakening employment prospects among younger workers directly threatens occupancy and rental rate growth for apartment REITs like NXRT.
- Shifting immigration trends: The firm noted that immigration patterns are “flipping toward potential net outflows in 2025 and 2026.” Immigration has been a meaningful driver of multifamily demand in recent years, and a reversal to net outflows would remove a significant source of tenant demand.
- “Historic” reversal in multifamily demand: Raymond James characterized the broader demand environment as undergoing a historic shift, suggesting the firm sees these headwinds as structural rather than temporary.
It is worth noting that Raymond James’ downgrade of NXRT was part of a broader sector review. The firm simultaneously downgraded other residential REITs, including Essex Property Trust, while making various rating adjustments across its multifamily coverage universe. This suggests the move reflects a sector-level thesis rather than company-specific concerns alone.
The timing of the downgrade is notable given NexPoint Residential’s recent earnings and guidance. The company reported mixed Q4 2025 results, beating on earnings but missing on revenue. NXRT also issued FY2026 FFO guidance of $2.57, which came in above the $2.39 analyst consensus estimate at the time. Additionally, the company announced a new acquisition alongside those results. Despite these positive signals from management, Raymond James appears to view the macro demand backdrop as overriding the company’s operational outlook.
Separately, at least one other analyst has taken a contrasting view. A Seeking Alpha report highlighted that NXRT offers significant upside to management’s estimated net asset value of approximately $48.57 per share, rating the stock a Strong Buy. This divergence underscores the level of debate around the name.
Dividend Overview
NexPoint Residential currently pays an annual dividend of $2.12 per share, which translates to a dividend yield of approximately 7.38% at recent prices. The most recent ex-dividend date was March 12, 2026.
That yield is notably elevated relative to the broader REIT sector, which can reflect both the income opportunity and the market’s perception of risk. With FY2026 FFO guidance of $2.57 per share, the dividend appears covered on a funds-from-operations basis, though the payout ratio is relatively tight. Investors focused on income will want to monitor whether the demand headwinds cited by Raymond James begin to pressure NXRT’s cash flows and, by extension, its ability to maintain the current distribution.
What This Means for Investors
The Raymond James downgrade puts NXRT in the firm’s least favorable rating category, signaling an expectation that the stock will underperform its peers. With no price target specified, the message is directional rather than tied to a specific valuation call. Dividend investors eyeing the 7.38% yield should weigh the income appeal against the macro risks the firm has identified — particularly the potential for weakening renter demand in the Sunbelt markets where NXRT primarily operates.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.