Camden Property Trust: A Steady Dividend Beacon in a Volatile Market

As interest rates hover near decade highs and economic uncertainty looms, income-focused investors are turning to defensive plays that blend dividend stability with fortress-like balance sheets. Camden Property Trust (CPT), a multifamily REIT with a 33-year dividend streak, fits this mold. But is its streak sustainable in an era of rising costs and slowing rent growth? Let's dissect the numbers.

Dividend Sustainability: High Payout Ratio, But Covered by Cash Flows

CPT's dividend yield of 3.63% stands out in a landscape where many REITs have cut payouts. The company recently increased its quarterly dividend to $1.05 per share, marking the third consecutive year of growth. However, its payout ratio—a key metric—has sparked debate.

At 2.92x (calculated as dividends per share divided by core FFO per share), the payout ratio is near a 13-year high and far above the 1.01x industry median. This suggests Camden is distributing nearly all its earnings as dividends. But here's the catch: reveals that core FFO has grown steadily, keeping the dividend covered. For Q1 2025, core FFO per share rose 1.2% year-over-year to $1.72, while interest expense fell due to lower borrowing costs.

The dividend's safety hinges on two factors: occupancy and rent growth. CPT's occupancy remains robust at 95.4%, and blended rental rates dipped just 0.1% in Q1—a testament to its focus on high-growth Sunbelt markets like Austin and Raleigh, where supply constraints persist. Analysts project the dividend yield to rise to 3.9% within three years, assuming stable cash flows.

Balance Sheet Resilience: Debt Metrics Hold Up

CPT's balance sheet is its secret weapon. Key metrics:
- Debt-to-equity ratio: 0.92 (debt of $4.31B vs. equity of $4.69B), well below the 1.5x threshold many REITs struggle with.
- Liquidity: $772.9M, including $26.2M in cash and $746.7M in unused credit facilities.
- Interest coverage: 2.3x (EBIT of $300.5M vs. interest expense of $33.8M), which, while below the preferred 3.0x, is bolstered by a recent $600M commercial paper program that slashed borrowing costs by 50 basis points.

The company's conservative leverage and ample liquidity buffer it against rising rates. Even with higher interest expenses, FFO growth and disciplined capital allocation (e.g., $184M in Nashville development) keep the balance sheet sturdy.

Risks on the Horizon

No dividend stock is without risk. CPT faces headwinds:
1. Multifamily oversupply: Rising construction in coastal markets could pressure occupancy and rents.
2. Cost inflation: Maintenance and operational expenses are creeping higher, squeezing margins.
3. Payout ratio sustainability: While covered now, a FFO miss or occupancy drop could test the dividend's health.

Investment Thesis: Defensive, but Monitor Closely

CPT is a compelling income play for defensive investors. Its dividend growth streak, Sunbelt exposure, and liquidity advantages make it a rarity in a rate-sensitive environment. However, the elevated payout ratio demands vigilance.

shows Camden's consistency. Pair this with its 79.7% debt-to-equity ratio (lower than many peers) and you've got a stock that balances income with relative safety.

Final Call: Buy for Dividends, but Keep an Eye on Occupancy

Buy CPT if you're seeking steady income with a shot at capital appreciation in a resilient sector. The dividend is safe for now, but investors should monitor Q3 occupancy data and FFO trends. For conservative portfolios, CPT's 3.6% yield offers a reliable anchor—provided the Sunbelt's growth story holds up.

Disclosure: The author holds no position in CPT.