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3.62% Yield REIT, Great For B&H, Consistent Dividend Growth


  • AvalonBay Communities is a top-tier REIT.
  • It has a nice dividend yield, which should be able to grow consistently.
  • AvalonBay is one of the largest apartment REITs and has excellent margins.

AvalonBay Communities (NYSE:AVB) is an excellent apartment REIT. It debuted with a Buy rating on the back of its solid growth and excellent valuation. This is one of the largest apartment REITs, and it is operationally excellent. It owns and operates upscale apartments in coastal markets.

AVB stands out among REITs for its expertise in developing new properties. In addition to running its portfolio effectively, the REIT is building new properties at attractive prices.

(Source: AVB Investor Presentation)

This emphasis on producing new apartment buildings is one of the key factors that sets AvalonBay apart. This is one of the reasons I believe it is an excellent security for the B&H (buy-and-hold) investor. AvalonBay's effective development of new properties enables it to grow more efficiently than many REITs would be able to.


We should dive into the analysis with a clear look at AVB’s performance on the fundamental metrics. If a REIT has been failing on these metrics over the last few years, it would indicate a severe problem with the company.

(Source: AVB Investor Presentation)

AVB has performed extremely well on the fundamentals. Its same-store NOI growth has been slightly behind the multi-family sector average. However, the REIT has developed a high volume of new properties that created additional value for the portfolio. The result is a very attractive growth rate in core FFO per share. I looked over a prior reconciliation for core FFO, and I am satisfied with the company's accounting. It was not making garbage adjustments.

It should be no surprise that AVB's dividend growth has also been quite attractive. When a REIT has reasonable same-store NOI growth, an excellent pipeline for new developments, and solid growth in core FFO per share, it should be matched with growth in dividends per share.

Let’s turn to

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Analyst’s Disclosure: I am/we are long EQR, AVB. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

No financial advice. Investors are expected to do their own due diligence and consult with a professional who knows their objectives and constraints. CWMF actively trades in preferred shares and may buy or sell anything in the sector without prior notice. Tipranks: Buy AVB.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (8)

Panzerman profile picture
AVB is a top tier Grade A apartment REIT. Good quality and good locations. That said, Im not a buyer as I feel the share price is still too high and the yield is not sufficient. This year will likely provide opportunities to pick up the shares at a lower price. I'm watching it closely.
AVB is the most attractive apartment REIT with national exposure, or at least bicoastal exposure. I would agree that it is still a bit above fair value, even with its recent declines. I took a starter position recently and will look to add again in the 140's, which could easily happen soon. Very bullish on apartments for long term total return, but it will be rocky at times. Long ESS, AVB, MAA in the sector and looking to add to all three positions.
Panzerman profile picture
Arimnestos....sounds good. Im looking at AVB at 125. May never happen but it could. Not ruling it out. I'm holding IRT now for my apartment holding. Clase B and A apartments. The apartment sector looks good to me, while Health Care REIT's look a bit scary.
wage growth mean inflation go up = interest rate go up VS REIT go down...
Rather simplistically put but accurate. A low yielder like AVB will not do well in a rising interest rate environment simply because there is no guarantee it can increase its FFO and dividend to match the increases. Also, as pointed out, affordability is becoming an issue.
Sklyazo profile picture
This article is perfectly timed for me. I sold a put on AVB at 160 strike through 3/16. I feel better now if it will be put to me.

I believe the real concern of oversupply in areas like NY and San Francisco and higher interest rates are already priced in this stock. Risk and reward is now in our favor at these levels.

Let’s see how 2018 develops. The rent concessions in suburban markets is a valid concern.

Affordability could also be an issue. I rented an apartment from AVB 10 years ago but now I cannot afford that apartment.

I am glad to know that 25-34 make more money than me in just 10 years.
50locations profile picture
Math Quiz IVH 100 x $155 = $15500.00 Div. $1.42 = $142 per quarter.

JE 1000 x $4.78 = $4780.00 Div. .10 = $100 per quarter

ORC 1000 x 7.22 = $7220.00 Div. .11 = $110 per MONTH

Who has best return for investment?
Honeycomb888 profile picture
The pain, the pain. No more REITs for me anytime soon. I'm swimming in red.
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