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AvalonBay Communities Inc's Dividend Analysis

Assessing the Dividend Profile of a Leading Apartment REIT

AvalonBay Communities Inc (NYSE:AVB) recently announced a dividend of $1.7 per share, payable on 2024-04-15, with the ex-dividend date set for 2024-03-27. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into AvalonBay Communities Inc's dividend performance and assess its sustainability.

What Does AvalonBay Communities Inc Do?

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AvalonBay Communities owns a portfolio of 281 apartment communities with over 87,000 units and is developing 18 additional properties with over 6,200 units. The company focuses on owning large, high-quality properties in major metropolitan areas of New England, New York/New Jersey, Washington D.C., California, and the Pacific Northwest.

AvalonBay Communities Inc's Dividend Analysis
AvalonBay Communities Inc's Dividend Analysis

A Glimpse at AvalonBay Communities Inc's Dividend History

AvalonBay Communities Inc has maintained a consistent dividend payment record since 1994. Dividends are currently distributed on a quarterly basis. AvalonBay Communities Inc has increased its dividend each year since 1994. The stock is thus listed as a dividend aristocrat, an honor that is given to companies that have increased their dividend each year for at least the past 30 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.

AvalonBay Communities Inc's Dividend Analysis
AvalonBay Communities Inc's Dividend Analysis

Breaking Down AvalonBay Communities Inc's Dividend Yield and Growth

As of today, AvalonBay Communities Inc currently has a 12-month trailing dividend yield of 3.63% and a 12-month forward dividend yield of 3.74%. This suggests an expectation of increased dividend payments over the next 12 months. Over the past three years, AvalonBay Communities Inc's annual dividend growth rate was 1.20%. Extended to a five-year horizon, this rate increased to 2.10% per year. And over the past decade, AvalonBay Communities Inc's annual dividends per share growth rate stands at 4.20%.

Based on AvalonBay Communities Inc's dividend yield and five-year growth rate, the 5-year yield on cost of AvalonBay Communities Inc stock as of today is approximately 4.03%.

The Sustainability Question: Payout Ratio and Profitability

To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, AvalonBay Communities Inc's dividend payout ratio is 1.29, which may suggest that the company's dividend may not be sustainable.

AvalonBay Communities Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks AvalonBay Communities Inc's profitability 8 out of 10 as of 2023-12-31, suggesting good profitability prospects. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.

Growth Metrics: The Future Outlook

To ensure the sustainability of dividends, a company must have robust growth metrics. AvalonBay Communities Inc's growth rank of 8 out of 10 suggests that the company's growth trajectory is good relative to its competitors. AvalonBay Communities Inc's revenue has increased by approximately 6.00% per year on average, a rate that outperforms approximately 63.75% of global competitors. The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, AvalonBay Communities Inc's earnings increased by approximately 4.80% per year on average, a rate that outperforms approximately 53.1% of global competitors. Lastly, the company's 5-year EBITDA growth rate of -2.10%, which outperforms approximately 35.21% of global competitors.

Next Steps

In conclusion, AvalonBay Communities Inc's consistent dividend payments and growth, combined with a robust profitability and positive growth metrics, present an attractive profile for value investors. While the high payout ratio may raise questions about sustainability, the company's strong financial health and market position could mitigate these concerns. Investors considering AvalonBay Communities Inc for its dividend prospects should also weigh these factors alongside their investment strategy. GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener to find similar investment opportunities.

This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.

This article first appeared on GuruFocus.