NexPoint Residential Trust Maintains Dividend Amid Mixed Financials: Is the Apartment Play Still a Buy?

NexPoint Residential Trust, Inc. (NYSE: NXRT) has reaffirmed its commitment to shareholders with an announced $0.51 per share dividend, payable on June 30, 2025, to holders of record on June 16, 2025. The dividend follows a consistent quarterly payout since early 2025, maintaining a 10.3% year-over-year increase from its 2024 rate. However, the announcement arrives amid mixed financial results and operational challenges, prompting investors to weigh the sustainability of this payout against broader trends in the multifamily sector.

Dividend Stability Amid Earnings Pressures

The dividend’s $0.51 per share rate remains fully covered by the company’s Adjusted Funds from Operations (AFFO), which totaled $0.84 per share in Q1 2025. This leaves a coverage ratio of 1.65x—down from 1.80x in Q1 2024—a narrowing margin that underscores rising operational headwinds. Full-year guidance calls for $3.16 per share in AFFO, which would support four consecutive $0.51 quarterly payouts. However, the 1.65x coverage ratio now sits at a five-year low, signaling the need for close monitoring of occupancy and NOI trends.

Q1 Financials: Gains Fade, Value-Add Strategies Shine

NexPoint’s first-quarter results highlighted a net loss of $6.9 million, a stark contrast to the $26.3 million profit in Q1 2024. This decline stemmed primarily from the absence of a $31.7 million gain from real estate sales recorded in the prior year. Core metrics, however, revealed a more nuanced picture:
- Same Store NOI fell 3.8% year-over-year to $37.7 million, driven by a 1.3% dip in average effective rent and a 0.3% drop in occupancy to 94.4%.
- Value-Add Initiatives delivered standout returns: 210 apartment upgrades in Q1 generated a 16.1% ROI, while cumulative upgrades since inception produced a 20.7% average return. These efforts, which include kitchen upgrades and technology installations, could offset near-term revenue softness.

Strategic Moves and Risks

• Debt Management: The company’s April 3 interest rate swap—fixing $100 million of variable-rate debt at 3.489%—reduces exposure to rising rates, a critical move given its $1.48 billion net debt. The 59% leverage ratio remains manageable but higher than peers.
• Share Repurchases: April’s $7.6 million buyback of 223,109 shares reflects confidence in the stock’s valuation, though the pace remains modest compared to its $100 million repurchase program.
• Operational Challenges: Fire damage at two properties temporarily idled 36 units, and occupancy declines suggest competitive pressures in markets like Texas and Florida.

Is the Dividend Sustainable?

While the $0.51 dividend is technically sustainable, its longevity hinges on reversing Same Store NOI declines and stabilizing occupancy. The AFFO-to-dividend coverage ratio’s decline, coupled with a projected 2025 Same Store NOI growth range of -1.0% to +1.0%, suggests limited room for error. Investors should also consider the stock’s valuation: At a 59% debt-to-EBITDA ratio and a price-to-AFFO multiple of ~37x (based on $3.16 annual AFFO and a $118 stock price), NXRT trades at a premium to its peers, which average ~25x.

Conclusion: A Hold with Caution

NexPoint Residential Trust’s dividend maintains its appeal for income investors, but its valuation and execution risks warrant caution. The company’s value-add strategy and disciplined debt management are positives, but Same Store performance and occupancy trends remain critical. Hold the stock unless you can secure a lower entry point or see signs of stabilization in its core metrics. Key data points to watch include:
- Q2 2025 occupancy levels and rent growth
- AFFO coverage ratio progression
- Progress on its 12,984-unit portfolio’s NOI trajectory

Investors should also compare NXRT’s dividend yield (~1.8%) against broader REIT peers, many of which offer higher yields amid sector-wide REIT discounts. For now, the dividend’s sustainability is intact—but the margin for error is narrowing.

Final Analysis: A Hold rating reflects the balance between dividend stability and valuation risks. Monitor for signs of Same Store recovery or a pullback in share price to justify a Buy.