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Mid-America Apartment Communities, Inc. (NYSE:MAA) plans to redeem all of its outstanding 8.50% Series I cumulative redeemable preferred stock on Oct. 1. The redemption replaces a fixed preferred dividend obligation with common-equity funding.

The preferred stock totaled 867,846 shares at June 30 with a $50 liquidation preference, or about $43.4 million in aggregate. At the stated annual dividend rate of $4.25 per preferred share, the securities carry about $3.69 million of annual preferred dividend payments by DFB calculation.

MAA plans to use proceeds from common shares sold through a forward sale agreement under its ATM program. The initial forward sale price was $130 per share, but the final common-share count has not been disclosed and should not be inferred from the preferred liquidation preference.

MAA says the transaction is expected to be accretive to Core FFO per share because the preferred dividend savings are expected to exceed the dilution from issuing common stock. The transaction replaces an 8.50% fixed preferred dividend with common-equity dilution, and the test is whether those savings exceed the dilution on a per-share basis.

The Preferred Carries An 8.5% Fixed Dividend

The Series I preferred stock carries an 8.50% stated dividend yield. MAA will pay a final quarterly dividend of $1.0625 per share on Sept. 30 to holders of record as of Sept. 15. The redemption price is $50 per share plus any unpaid accrued dividends.

Using the June 30 share count, the $50 liquidation preference equals about $43.4 million. The annual preferred dividend is approximately $3.69 million by DFB calculation.

The 8.50% rate is fixed. Redeeming the preferred eliminates that annual preferred dividend requirement after the redemption date, assuming the transaction closes as scheduled.

The redemption has been announced and scheduled, not completed. Preferred dividends continue through the final Sept. 30 payment, and the shares do not stop accruing dividends until the Oct. 1 redemption date.

The transaction therefore should not be described as a completed reduction in dividend expense today. It is a scheduled capital-structure change whose economic effect becomes visible after the preferred is retired and the related common-equity settlement is reflected in the share count.

Common Equity Creates A New Denominator

MAA said the redemption will be funded with proceeds from a forward sale agreement under its ATM program, with an initial forward sale price of $130 per share.

That does not provide an exact post-transaction share count. Forward sale prices can be adjusted under the agreement, and the company has not disclosed the final number of common shares that will be issued for settlement. Dividing the preferred liquidation preference by $130 would therefore create a share-count estimate that the company has not reported.

At June 30, MAA had 116,015,088 common shares outstanding. The final settlement will therefore determine how much that common-share base expands in exchange for eliminating the Series I preferred dividend.

Its current quarterly common dividend is $1.53 per share, or $6.12 annualized, providing the pre-settlement common-dividend baseline for the transaction. Against the $8.53 midpoint of 2026 Core FFO guidance, that equals a 71.7% payout by DFB calculation.

The preferred redemption does not change that payout ratio mechanically in advance. What changes is the capital structure underneath it. Preferred dividends disappear, while the common-share denominator increases when the forward sale is settled.

MAA characterized the move as a targeted capital structure initiative rather than a traditional capital raising transaction. The company is using common equity to remove a higher-cost preferred security and expects the preferred dividend savings to outweigh the resulting dilution.

What Core FFO Per Share Has To Show

MAA’s own accretion statement frames the test. If the preferred dividend savings exceed the dilution from the additional common shares, Core FFO per share should benefit, as MAA expects. If the common-share denominator grows by more than the earnings benefit created by removing the preferred dividend, the per-share outcome would differ.

The current common dividend sets the baseline. At $6.12 annualized against an $8.53 Core FFO midpoint, the common payout ratio is about 71.7% before the preferred redemption is completed.

After settlement, the question is whether the approximately $3.69 million of preferred-dividend savings and the final common-share issuance produce the per-share accretion MAA expects. The preferred dividend savings can be calculated from disclosed figures. The final common-share dilution has not been disclosed.

Until settlement, the final share count has not been reported. Core FFO per share is where the two meet.

Source: Mid-America Apartment Communities Form 8-K and redemption announcement, Aug. 28, 2026; Mid-America Apartment Communities second-quarter 2026 Form 10-Q and financial results, July 29, 2026. Preferred annual dividend and common-dividend payout calculations by Dividend Forensics Bureau from company-reported figures.

The author holds no position in any security mentioned. Structural research, not personalized investment advice.

Further dividend structure research is published at dividendforensics.com.

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.