| Snowflake Score | |
|---|---|
| Valuation | 5/6 |
| Future Growth | 1/6 |
| Past Performance | 1/6 |
| Financial Health | 1/6 |
| Dividends | 5/6 |
AVB Stock Overview
As of December 31, 2020, the Company owned or held a direct or indirect ownership interest in 291 apartment communities containing 86,025 apartment homes in 11 states and the District of Columbia, of which 18 communities were under development and one community was under redevelopment.
AvalonBay Communities, Inc. Competitors
Price History & Performance
| Historical stock prices | |
|---|---|
| Current Share Price | US$188.82 |
| 52 Week High | US$259.05 |
| 52 Week Low | US$183.35 |
| Beta | 0.95 |
| 1 Month Change | -11.51% |
| 3 Month Change | -3.24% |
| 1 Year Change | -16.60% |
| 3 Year Change | -11.88% |
| 5 Year Change | 5.83% |
| Change since IPO | 804.53% |
Recent News & Updates
AvalonBay Communities declares $1.59 dividend
AvalonBay Communities (NYSE:AVB) declares $1.59/share quarterly dividend, in line with previous. Forward yield 3.16% Payable Oct. 17; for shareholders of record Sept. 30; ex-div Sept. 29. See AVB Dividend Scorecard, Yield Chart, & Dividend Growth.
Stagflation Resistant Real Estate On Sale: AvalonBay And Medical Properties
Summary Numerous economic indicators imply that we are headed for a period of stagflation. While not all real estate is poised to thrive in such an environment, some are. AVB and MPW are two discounted REITs that are poised to thrive in a stagflationary environment. Numerous economic indicators imply that we are headed for a period of stagflation. These include inflation rates not seen in four decades, slowing economic growth, and headwinds such as the war in Ukraine, lingering supply chain issues, and geopolitical unrest in the Taiwan Straits that all combine to paint a picture of higher inflation and lower economic growth for the foreseeable future. The real estate sector (VNQ) is quite diverse in its structure and positioning for various macro environments. For example, more defensive triple net lease REITs like Realty Income (O) and STORE Capital (STOR) are well positioned for periods of low economic growth or even economic declines, but they are not well positioned for periods of high inflation. Meanwhile, hotel REITs like Host Hotels (HST) are well positioned for periods of high inflation, but not as well positioned for weak economic environments. Fortunately, some real estate is well positioned to thrive in a stagflationary (high inflation and weak economic growth) environment like the one we currently find ourselves in. Two REITs that appear particularly well suited to the current environment are AvalonBay Communities (AVB) and Medical Properties Trust (MPW). In this article, we will discuss these two REITs and why we believe they are not only well suited to the current environment, but also offer investors compelling total return potential. #1. AvalonBay Communities The first thing that jumps out to us about AVB is that its stock price currently trades below its pre-COVID-19 levels, implying that the company has been meaningfully hurt by the pandemic, or at the very least, is currently facing severe economic headwinds. However, this is not true at all as AVB is benefiting from strong rental growth (~20% nationwide average apartment rental rate growth since COVID-19 hit the U.S.), strong property appreciation, and portfolio growth in attractive markets like Texas and Florida. While multifamily development is booming at the moment - implying that the supply-demand dynamic may flip the other way in the coming years - supply chain logjams are currently prolonging the time for many of these developments to come to market, keeping supply suppressed relative to soaring demand. As a result, AVB is generating outstanding performance. In Q2, its FFO per share was up 22.3% year-over-year, prompting management to increase its full-year core FFO per share guidance to $9.86 at the midpoint. This implies a P/FFO ratio of 21.1x for 2022, which is below its five-year average of 22.9x and three-year average of 24.0x, despite the company benefiting from strong demand for its apartments, soaring inflation (which benefits AVB due to its short lease structure, thereby enabling AVB to raise its rents each year), and the defensive nature of residential real estate. On top of that, AVB offers investors an attractive 3.2% dividend yield and an expected AFFO per share growth rate of 19% in 2022 and 10% in 2023. When you combine double-digit AFFO per share growth with a 3.2% dividend yield and the possibility of a slight tailwind from multiple expansion, the total return proposition looks quite promising. When you add to that the A- (stable outlook) credit rating from S&P and its general defensive positioning as a residential REIT, you get a very attractive risk-reward profile. While the threat of overbuilding could hurt AVB in a few years, overall, the risk remains quite low, especially when compared with the total return potential. #2. Medical Properties Trust MPW meanwhile, is quite defensive given that it leases out defensive and mission-critical hospitals on conservatively structured and lengthy term triple net leases. While it is true that hospitals may suffer a revenue decline during a recession given that many elective surgeries are postponed during these periods, demand will likely still remain high for the real estate given that people's health does not fluctuate wildly with the state of the economy. However, what separates MPW from many of its triple net lease peers is that it has CPI adjustments in its leases, giving it considerable inflation protection and thereby setting it up to thrive in the current stagflationary environment. On top of that, MPW stock is back to trading near COVID-19 lows as investors are growing increasingly worried that its tenants are financially distressed. However, we believe these fears are misplaced as its tenants have ~2.5x rent coverage at the property level, implying that these assets are highly valuable and will be in-demand even if the operators go bankrupt at the corporate level. In fact, in the event that the tenant goes bankrupt and defaults on its lease, MPW has the right to take back its properties and release them to a different tenant. Given that they are such profitable properties, it is unlikely that tenants will default on those specific leases even if they have to declare bankruptcy at the corporate level. Even if their leases are defaulted on, MPW should be able to release these attractive properties to new tenants. Again, these are highly profitable mission-critical healthcare assets in good locations. People will need to use them regardless of whether the current tenant is solvent or not. In fact, MPW recently sold a joint venture stake in some hospitals operated by its largest tenant (Steward) - which has many of its critics concerned about a potential bankruptcy for the hospital operator - at a 5.8% cap rate. Given that this cap rate is far below that which is implied by the current MPW share price, it appears that the private and public markets have a sharply differing perspective on the true value of MPW's properties and the safety of its leases. In fact, when you consider the defensive nature of its leases, the high profitability of its properties, and the inflation resistance built-in to its rent escalators, its massively discounted valuation metrics make even less sense: Metric Current 5-Year Average P/AFFO 10.70x 13.94x Dividend Yield 7.91% 6.07% P/NAV 0.80x 1.16x EV/EBITDA 13.85x 14.43x
Shareholder Returns
| AVB | US REITs | US Market | |
|---|---|---|---|
| 7D | -6.5% | -6.2% | -5.2% |
| 1Y | -16.6% | -18.6% | -23.1% |
Return vs Industry: AVB exceeded the US REITs industry which returned -18.6% over the past year.
Return vs Market: AVB exceeded the US Market which returned -23.1% over the past year.
Price Volatility
| AVB volatility | |
|---|---|
| AVB Average Weekly Movement | 3.4% |
| REITs Industry Average Movement | 3.7% |
| Market Average Movement | 6.9% |
| 10% most volatile stocks in US Market | 15.9% |
| 10% least volatile stocks in US Market | 2.8% |
Stable Share Price: AVB is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 3% a week.
Volatility Over Time: AVB's weekly volatility (3%) has been stable over the past year.
About the Company
| Founded | Employees | CEO | Website |
|---|---|---|---|
| 1978 | 2,883 | Ben Schall | https://www.avalonbay.com |
As of December 31, 2020, the Company owned or held a direct or indirect ownership interest in 291 apartment communities containing 86,025 apartment homes in 11 states and the District of Columbia, of which 18 communities were under development and one community was under redevelopment. The Company is an equity REIT in the business of developing, redeveloping, acquiring and managing apartment communities in leading metropolitan areas in New England, the New York/New Jersey Metro area, the Mid-Atlantic, the Pacific Northwest, and Northern and Southern California, as well as in the Company's expansion markets consisting of Southeast Florida and Denver, Colorado (the "Expansion Markets").
AvalonBay Communities, Inc. Fundamentals Summary
| AVB fundamental statistics | |
|---|---|
| Market Cap | US$26.37b |
| Earnings (TTM) | US$813.27m |
| Revenue (TTM) | US$2.46b |
32.4x
P/E Ratio10.7x
P/S RatioIs AVB overvalued?
See Fair Value and valuation analysisEarnings & Revenue
| AVB income statement (TTM) | |
|---|---|
| Revenue | US$2.46b |
| Cost of Revenue | US$884.24m |
| Gross Profit | US$1.57b |
| Other Expenses | US$758.24m |
| Earnings | US$813.27m |
Last Reported Earnings
Jun 30, 2022
Next Earnings Date
n/a
| Earnings per share (EPS) | 5.82 |
| Gross Margin | 63.99% |
| Net Profit Margin | 33.12% |
| Debt/Equity Ratio | 73.3% |
How did AVB perform over the long term?
See historical performance and comparisonDividends
3.4%
Current Dividend Yield72%
Payout RatioDoes AVB pay a reliable dividends?
See AVB dividend history and benchmarks| AvalonBay Communities dividend dates | |
|---|---|
| Ex Dividend Date | Sep 29 2022 |
| Dividend Pay Date | Oct 17 2022 |
| Days until Ex dividend | 4 days |
| Days until Dividend pay date | 22 days |
Does AVB pay a reliable dividends?
See AVB dividend history and benchmarks