Beyond Trailer Trash: Three Trailer Park Stocks You May Want to Move To (ELS, SUI & UMH)

Trailer parks may have a bad reputation, but Yahoo! Finance's Breakout segment was recently touting trailer parks as a hot new investment area – meaning its time for retail investors who don't want to invest in physical parks to start taking a closer look at trailer park stocks Equity Lifestyle Properties, Inc (NYSE: ELS), Sun Communities Inc (NYSE: SUI) and UMH Properties, Inc (NYSE: UMH). According to the segment, roughly 6% of Americans lived in trailer homes as of 2012 with the supply of designated trailer parks being quite low because no one wants one in their backyard. Anthony Effinger, the author of another article about trailer parks for Bloomberg, was quoted as saying:

"Trailer parks have unusual economics, It's a supply and demand curve that's super attractive to investors… What's at work here is the shrinking middle class."

Apparently, people with bad credit and criminal histories are often unable to rent or buy homes – forcing them into trailer parks where owners are usually willing to overlook credit and criminal activity plus the average trailer home in America rents for just at $390 a month.

With that in mind, here is a look at three trailer park stocks (Note: All are REITs) for retail investors who don't want to own actual trailers:

Equity Lifestyle Properties. A leading operator of manufactured home communities, RV resorts and campgrounds in North America, Equity Lifestyle Properties has more than 379 communities and resorts with over 140,000 sites. Moreover, the company notes that its presence in 32 states and British Columbia protects it from economic downturns in any one market. It should also be noted that approximately 70% of Equity Lifestyle Properties' residents are 55+ and nearly two-thirds of the company's communities are marketed exclusively as age qualified communities. In addition, the company's "site set" homes have an average new price of just over $75,000 and average more than 1,400 square feet with custom features such as peaked roofs, skylights, screened-in porches, bay windows, fireplaces and designer kitchens. Finally, Equity Lifestyle Properties has a trailing P/E of 31.65 and a forward P/E of 14.46 plus a forward dividend of $1.30 for a 3.2% dividend yield. On Thursday, Equity Lifestyle Properties fell 0.10% to $40.77 (ELS has a 52 week trading range of $33.36 to $42.86 a share) for a market cap of $3.40 billion plus the stock is up 11.8% since the start of the year, up 2.4% over the past year and up 94.2% over the past five years.

Sun Communities Inc. A provider of manufactured home communities and RV resorts, Sun Communities owns and operates 192 manufactured housing and recreational vehicle communities in 27 states that are concentrated in the Midwest and Southeast portions of the United States. Sun Communities actively seeks acquisitions of trailer park communities meeting the following criteria: Manufactured housing & RV communities with a minimum of 200 home sites located near metropolitan areas with population of at least 100,000. Land/lease communities (will consider communities with rental homes and home notes). All age, family-oriented and retirement communities. Manufactured housing site sizes of 50' x 100' or greater. RV communities with 50% or greater annual leases. Local market areas with vacancy of less than 20%. Minimum rent growth potential of 3% per annum. Public utilities preferred. Expansion potential a plus.

However and in the latest earnings report, the Chairman/CEO commented:

"Our focus on acquisitions in the RV marketplace is based in part on increases in the annual shipments of RV`s, which are expected to increase by 6% in 2014 marking the fifth consecutive annual increase in shipments. In addition, over 40% of demand for RV parks is from adults over 55 years of age which is a growing segment of our population."

Sun Communities has a trailing P/E of 144.10 and a forward P/E of 11.88 plus a forward dividend of $2.60 for a 5.80% dividend yield. On Thursday, Sun Communities fell 1.15% to $43.95 (SUI has a 52 week trading range of 39.53 - 57.78 a share) for a market cap of $1.59 billion plus the stock is up 3.3% since the start of the year, down 8.5% over the past year and up 222.7% over the past five years.

UMH Properties, Inc. With a portfolio of 74 manufactured home communities housing approximately 13,400 home sites, UMH Properties owns and operates manufactured home communities in seven states throughout the northeast, including New Jersey, New York, Ohio, Pennsylvania, Tennessee, Indiana and Michigan. In addition, UMH Properties owns over 810 acres of land for the development of new sites plus a subsidiary called UMH Sales and Finance, Inc which sells manufactured homes into UMH communities. In mid March, UMH Properties reported earnings where the CEO noted:

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"The Company acquired 17 communities containing approximately 2,700 developed homesites for a total purchase price of $88.3 million.  This represents a 27% increase in total homesites over the prior year. Our growth strategy is to purchase communities in strong geographic areas, make appropriate capital improvements, add sales staff and marketing and thereby increase income and occupancy."

During 2013, UMH Properties acquired 17 communities containing a total of 2,700 developed homesites for $88.3 million and entered into definitive agreements to purchase an additional 12 communities containing 1,300 developed homesites for approximately $37 million. UMH Properties has a forward P/E of 12.73 and a forward dividend of $0.72 for a 7.4% dividend yield. On Thursday, UMH Properties fell 0.71% to $9.80 (UMH has a 52 week trading range of $9.01 to $11.55 a share) for a market cap of $209.81 million plus the stock is up 4.6% since the start of the year, down 7.5% over the past year and up 60.7% over the past five years.

Finally, here is a closer look at all three trailer park stocks:

As you can see from the above chart, all three trailer park stocks have put in a decent performance for investors, but Sun Communities has had a more exceptional performance.