Assessing AvalonBay Communities Inc's Dividend Sustainability: A Deep Dive
An Insightful Look into AvalonBay Communities Inc's Dividend Performance and Future Prospects
AvalonBay Communities Inc(NYSE:AVB) recently announced a dividend of $1.65 per share, payable on 2023-10-16, with the ex-dividend date set for 2023-09-28. 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 deep dive into AvalonBay Communities Inc's dividend performance and assess its sustainability.
About AvalonBay Communities Inc
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AvalonBay Communities owns a portfolio of 276 apartment communities with over 82,000 units and is developing 18 additional properties with over 5,700 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 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 29 years.
AvalonBay Communities Inc's Dividend Yield and Growth
As of today, AvalonBay Communities Inc currently has a 12-month trailing dividend yield of 3.75% and a 12-month forward dividend yield of 3.82%. 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 1.50%. Extended to a five-year horizon, this rate increased to 2.50% per year. And over the past decade, AvalonBay Communities Inc's annual dividends per share growth rate stands at 5.10%.
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 4.24%.
Payout Ratio and Profitability: Can AvalonBay Communities Inc Sustain Its Dividend?
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 2023-06-30, AvalonBay Communities Inc's dividend payout ratio is 0.73. This 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 2023-06-30, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Future Outlook: Growth Metrics
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.
Revenue is the lifeblood of any company, and AvalonBay Communities Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. AvalonBay Communities Inc's revenue has increased by approximately 3.60% per year on average, a rate that outperforms than approximately 62.58% 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 13.00% per year on average, a rate that outperforms than approximately 64.74% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 3.90%, which outperforms than approximately 50.87% of global competitors.
Concluding Thoughts
With a consistent dividend payment record, an increasing dividend growth rate, and robust growth metrics, AvalonBay Communities Inc presents an attractive proposition for dividend investors. However, the relatively high payout ratio may raise concerns about the sustainability of future dividends. Therefore, potential investors should consider these factors in their investment decisions.
GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article first appeared on GuruFocus.
