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Do You Buy AvalonBay And Its 3.5%-Yielding Dividend?

Published Sun, 30 Dec 2018 11:15:07 -0500 on Seeking Alpha

Investment Thesis
AvalonBay Communities (AVB) owns a portfolio of residential properties primarily in New England, the New York/New Jersey area, the Mid-Atlantic, the Pacific Northwest, and Northern and Southern California. The REIT should be able to benefit from favorable demographic trends, and strong market fundamentals in its major coastal markets. AvalonBay has done an excellent job of increasing its same-store net operating income margin since 2012. It also has a good track record of dividend growth in the past. The company’s shares are also slightly undervalued. We believe this is a good investment choice for investors seeking a stable and steadily growing dividend income. However, investors may want to apply a higher margin of safety especially because macroeconomic conditions are a bit uncertain at the moment.

Source: YCharts
Recent Developments
In Q3 2018, AvalonBay grew its revenue by 7% year over year to $569 million. It also achieved 4.1% growth in its core funds from operations per share. As a result, its core FFO increased to $2.28 per share. The increase was mostly due to higher net operating income from. In the past quarter, the REIT also achieved good same-store rental revenue growth of 2.3% year over year. In the past quarter, its occupancy ratio declined by 20 basis points to 96.1% from a year ago.

Source: Fall 2018 Investor Update
Reasons why we like AvalonBay and its portfolio
Diversified portfolio of properties... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
EQUITY RESIDENTIAL 81.64   40.8 2.00 2.27 2.84


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